Rental Property Management Fundamentals
The Manager's Role and the Management Agreement
Rental property management is the business of operating residential real estate on behalf of an owner (the principal) while earning a fee, usually a percentage of collected rent. A candidate must understand the management agreement, which sets out the manager's authority: leasing, rent collection, maintenance, disbursements, and reporting. Key concepts include fiduciary duty (loyalty, disclosure, accounting), the distinction between the manager's own funds and trust funds, and the difference between a tenant's obligations and an owner's obligations.
Operating Economics
Understand gross rent versus net operating income, vacancy and credit loss, and the reserve for repairs. A common trap is confusing scheduled rent with collected rent; management fees are normally calculated on collected rent, not on rent billed. Another trap is treating a security deposit as revenue - it is a liability held in trust.
Maintenance and Delegation
Know the difference between routine, emergency, and capital repairs, and the manager's spending limit. Questions often test whether a manager may authorize an emergency repair above the limit without prior approval; the usual rule of thumb is that protecting life, safety, and property justifies immediate action with prompt notification and documentation.
Worked Example
Owner bills $2,000 rent; tenant pays $1,800 after a partial vacancy credit. Fee is 8% of collected rent. Fee = 0.08 × $1,800 = $144, not $160. Owner receives $1,800 − $144 − authorized expenses.
Traps to Watch
Watch for questions that blur the owner's instructions with the manager's discretion, or that imply the manager may use one client's trust funds for another client's property. Always separate authority, money, and documentation.