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Do you need a property manager to manage your condominium unit?

In the past few years that we have been managing condominium units, a common question from clients is whether they need to hire a property manager to look after their investments. It is a valid question, considering a condominium is very different from other types of properties.

Whenever I get this question, I normally start by providing the characteristics of a condominium operations and then a list of questions to ask to help them decide on whether they need to hire a property manager. In this article, we will provide you with the characteristics that distinguish condominiums and questions you can ask yourself.

Just to highlight, we will be focusing on the Philippines condominiums.

Characteristics of Condominium

Below are three of the key characteristics you need to be familiar that can help you understand the scope of work needed to manage a condominium unit.

You own an individual unit and have shared responsibility in common areas.

One of the main differences of a condominium with an apartment is the ownership. Apartment buildings are normally owned by a single individual or legal entity, whereas a condominium building is owned by multiple entities. A stock corporation is created for each condominium building and the unit(s) you own represents your shares. Areas such as hallways, reception areas, swimming pools and recreational halls are called common areas that you do not own, but have shared responsibility of them. That means the cost of repairs or renovations of common areas are shared among unit owners.

Property Management Office (PMO) handles the operations and manage the common areas not your unit.

This is one of the most misunderstood concepts in a condominium. The PMO is assigned by the corporation to manage only common areas and operations such as security, garbage collection, bills distribution, maintenance, and ensures that building policies and restrictions are followed. They do not manage the individual units. After you accept your unit, there is a certain warranty period where any issues in the unit can still be addressed by the PMO. However after this period is over, any issues in the unit are no longer under their care. So, don't be surprised when you report something to the PMO and they tell you "Sorry this is no longer under warranty." Another important thing to note about the PMO is that they enforce the building's policies. For example, if you fail to pay your monthly dues, they can cut off your water supply. Troubles arise because unit owners are not aware of the policies which sometimes results in arguments with the tenants. All condominiums provide units owner with a handbook; Ensure that you read it!

The monthly association dues you pay is for maintaining the common areas.

The monthly contribution you pay goes to paying the personnel in the building - security guards, PMO staffs, cleaners and maintenance people. The amount varies depending on the amenities. One key idea here is the more fancy the amenities, the more expensive are the dues. This is one thing I always explain to potential investors when they are considering purchasing a condo. It's one of my main considerations when selecting a condo to invest in. We'll discuss more about this in another article. For now, just remember the monthly dues are not fixed. They can increase over time depending on the cost of living and other economic factors. Also, don't be surprised that there will be an additional collection called a special assessment. These are expenses that are collected quarterly or annually. This includes Real Estate Tax for the common areas and building insurance. All of these are necessary costs in order to maintain the value of the property.

We only highlighted these three most important characteristics but there are more things you need to be aware of. With these in mind, you can now ask yourself the following questions to help you decide whether you should hire a property manager.



Is your property near to where you live?

The first question to ask is whether you live near the condominium you own. If you are living in another city or country, the next question is whether you have a relative or friend living near the condominium and whether they are willing to look after your unit for you. If they answer yes, then you are in luck and you may save some money. However, before you get excited, check the experience of that person you are assigned to take care of your unit. You are in double luck if the person has the same level of care and concern for your unit.

How many units do you own?

If you only have one unit, it does not mean you a property manager is not needed. It still depends whether you have the time to do all the work needed to run your rental business. Having multiple units just means you have more things to look after and more tenants to manage. If you are an investor whose goal is on growing your rental portfolio, it will make more sense to delegate managing your properties to a professional so that you can focus your time and energy on the things that really matter.

Do you have the time to look after your unit and your tenant?

Time is our most precious asset and we should spend it on the things that enable us to reach our goals. Managing a property and tenant can be time-consuming especially when issues arise. There is much work involved. Aside from looking for a tenant, you have to monitor and pay the bills, attend to tenant's concerns and make repairs.

Do you have the experience in managing a property?

If you want to invest in a rental property, but don't have experience in property management, hiring a professional property manager can be the right decision. Learning as you go can be costly.

For the first time property investor, hiring a wrong repairman or getting a delinquent tenant can eat on your potential income. Using a generic lease contract that does not protect your interests can cause problems down the road. Hiring an experienced property manager can save you the trouble and money on making these mistakes.

Do you have the skills to screen tenants?

One of the key components in owning a rental property is to look and screen for the right tenant. Some underestimate the importance of screening tenants but it can become a horror story if not done properly. Tenants can destroy property or use it for illegal purposes. Screening is just the first step, but more important is ongoing regular inspection of the property to ensure that your tenant is taking a good care of your unit. You do not want to find out at the end of the lease that you have a unit that requires major repairs. A property manager's key responsibility is regular inspection and spot checking on tenants.

Can you handle the tenant?

If you are lucky enough to have a good tenant, the worst thing that you can experience is being bothered by complaints. Things do not stay as they are. Issues can arise in the unit such as leaks, appliance breaks down, tenants gets locked out, etc. Having a property manager can save you the headache of dealing with these problems.

Eviction is one factor you need to consider. It can be a very stressful experience to evict a delinquent tenant. Property managers are skilled in handling conflict and understand the landlord-tenant law and can serve as a middle-man. Besides, if the tenant knows that they are dealing with a property manager, they may act more professionally as well.

They relieve you the stress

Can you afford the fees involved?

This is probably the primary consideration for most of us. Now, how much does it really cost to hire a property manager? The answer depends on the scope of the services they provide. Common charging model is a percentage of your gross monthly income. It goes from 4 percent to 10 percent.

For example, a unit that earns P20,000 a month might have a management fee of 5 percent or P1,000.

The management fee is charged separately. Property managers can also charge a tenant placement fee or a commission which is typically equivalent to one month's rent for a one year lease.

Other charges may be things such as cleaning fees, filing of real estate tax, facilitation of repairs and maintenance, etc. Ensure that you ask for the schedule of their fees.

Also check whether they charge the management fee even if there is no tenant.

Are you comfortable letting someone else manage the property's finances?

Property manager can be considered fund managers because they typically manage the financial aspect of your property. Property managers manage services including paying your bills, collecting rent, and remitting to you the proceeds net of expenses and fees. You should be aware of this and screen the property manager well. There are differences on how property managers handle expenses. Some will pay them first on your behalf and bill you at a later stage and some will bill you first and wait for your payment before they pay the expenses (especially if the unit is vacant). Do check on how they manage the expenses.

Are you willing to give control?

Hiring a property manager means giving control over to them. In most cases, property management agreements will state what powers they will have. Typically, property managers will ask that they have some level of control in managing the property. For property managers to function efficiently, they need to have the capability to act decisively. If they need to ask for your permission for almost everything, including approving tenants, then it may slow down the process. In a highly competitive market, the decisiveness of property managers are crucial skills. As the investor that hires a property manager a certain level of trust that your property manager is deciding your best interest. One way to know if the property manager is qualified is to check if they own properties. If they manage their own properties, then they would have the mindset of an investor and would know what is best for their clients.

We hope this article gave you some useful information. If you have further questions, feel free to email us at info@sonders.com.ph and we will be more than happy to answer your questions.

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