OBJECTIVES & PURPOSES OF REAL ESTATE PROPERTY MANAGEMENT

Designed & Lectured by:

PROFILE OF DR. MANUEL C. ADIOVA

DR. MANUEL C. ADIOVA is a veteran HR Professional having served as HR Manager in various

companies in the Philippines including GENTEX, EVERTEX, URC, MENZI, and LEPANTO. He founded
the People Management Association of the Philippines (PMAP – CALABARZON) where he was 4 times
president from 1997 – 2002. He was VP for Human Resources at DSK Industries, Inc. and QGM
International Ltd at Quandong, China. “Manny” was also Human Resource & Training Manager at Al-Jubail
Petrochemical Company, Saudi Arabian Becthel Company, and Saudi Arabina Naval Forces, El-Seif Group
of Companies, all in Kingdom of Saudi Arabia.

Manny is an an academician, having been Professor at various colleges and universities like Letran-
Calamba in Laguna; University of Petroleum & Minerals (UPM) in Saudi Arabia; Gulf College (GC) in
Muscat Sultabate of Oman; Stafforshire University (SU) in United Kingdom (UK); and currently teaching
BSREM at Lyceum of the Alabang (LOA).

Academically, Dr. Adiova graduated with the Degrees of BSBA at University of Northeaster Philippines
UNET in Iriga City; DLR - Diploma in Labor Relations at University of the Philippines (UP); Master in
Business Administration (MBA) at University of California Los Angeles (UCLA) USA; PhD in
Management at Letran-Calamba; Doctor of Business Administration (DBA) at Staffordshire University
(SU), United Kingdom (UK); and currently enrolled with Doctorate in Real Estate Management (DREM) at
UCLA Online Program.

Professionally, Manny is a licensed Real Estate BROKER, Real Estate APPRAISER, Real Estate
CONSULTANT and an Accredited Real Estate LECTURER; a Certified Compensation Management
Professional (CMP); a Registered Financial Palnner (RFP); a Fellow in People Management (FPM); and an
Accredited Cooperative Trainor (ACT).

He was President of Calamba Laguna Real Estate Board (CLRB) in 2017, he founded and 4 times President
of Creating Abundance in Real Estate Network Multipurpose Cooperative (CARENET).

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INTRODUCTION

Just as real estate salespersons, brokers, appraisers and consultants provide valuable services to buyers and
sellers, property managers also provide an important service to property owners. This course explores
several issues related to the business of property management, including:

 The role of property manager in investment to real estate;

 The property management service agreement and the compensation;

 The functions of the property manager; which include:

 Administration,

 Marketing and advertising,

 Tenant selection,

 Lease negotiation,

 Move-in inspections,

 Property maintenance,

 Rent collection,

 Move-out inspections, and

 Security deposits.

 The role and functions of Asset Manager

 The role of Property Manager (PM)

 We know that most property owners are capable of managing their real estate investments,
they are willing to do more complexities of day-to-day operations of all his real estate
investments especially if the has more properties to manage. Hence, they are left with the
option to hiring a PM. For example, Henry Sy being the PO, he is not willing to personally
management his carious real estate investments.

 When the property owner (PO) hires a professional property manager, the PM acts as an
agent for the PO in terms of leasing, marketing, marketing, and overall operation of the
property. In the US, PMs are not necessary a licensed real estate practitioner but here in the
Philippines, RA9646 requires that all persons who deals with marketing real estate must be a
licensed real estate practitioner, at least a licensed broker.

Consider this, an investor who purchases a small shopping center. Unless he is experienced in managing a
shopping center management, a PM may be required to handle the center operations with the following
tasks:

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  Marketing space in the center to potential tenants,

 Negotiating the lease agreement,

 Collecting rents,

 Addressing tenant’s concerns,

 Coordinating the property maintenance program,

 Bookkeeping, and

 Paying the property expenses such as utilities, property insurance, property taxes, and
employee salaries.

 Mode of Employment

A PM may be hired as a salaried employee or an independent contractor or he may be employed by a firm

which is an outsourced contractor of the property management operation

 Salaried employee

 Independent contractor

 Employee of a contractor

Differences B/n Employee and Independent Contractor

Salaried Employee Independent Contractor

1. Paid based on hours performed with employer-
employee relations;
2. Withheld tax from the PM’s salaries;
3. PO exercise control over the activities of PM as
employee;
4. PO trains his PM to become productive;
5. PO provides benefits and incentives to PM, pay
SSS, Philhealth, Pag-IBIG counterpart
contributions;
6. PO may hire PM even he is not a licensed
practitioner;
7. PO is responsible to provide required resources in
property operations;
8. Requires written employment contract/agreement. resources except for major facilities in the
Paid based on production or percentage .1
revenues;
Independent contractor is responsible to .2
pay own taxes and gov’t benefits;
PO exercise control over the PM since PM .3
works for PO;
PO is not required to trains the PM .4
because he is paid for his talent;
PO not required to provide benefits and
incentive to PM
accredited professional practitioner can .6
work as independent contractor as per
RA9646;
PO is not responsible to provide necessary .7
operation;
Written agreement is necessary to protect .8
both PO and PM

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  Property Management Agreement

The Management Agreement establishes an agency relationship between the PO and the PM. To clarify
each party’s duties and responsibilities, an agreement must be established in written form. The documents
must specify the powers, obligations, and compensation of the PM

 Powers of the Property Manager

 As the agent of the owner, the PM has a power to set rents;

 To execute, extend and cancel leases;

 To make settlements with tenants;

 To collect rents;

 To spend money on behalf of the property, and

 To hire, fire, and supervise personnel to operate the property

 While the PM has the power to act on behalf of the PO, he has the obligation to carry out those functions in
a professional manner. Because the PM has a fiduciary relationship with the PO, normal management
agreements require that the agent and his employees be properly bonded.

 Being a fiduciary means that the PM must always work in the interest of the principal even in agency
relationship.

 The PM Compensation
 If the PM is directly employed by the PO, the most common form of compensation is based on
percentage of the property’s gross income of approximately 4% to 6%, depending on such
factor as the size of the project, responsibilities of the PM and the competitiveness of the
local market.

 If the PM is an employee of a property management outsourced firm contracted to provide

property management services, the PM compensation is usually based on fixed salary. In the
US, the salary of PM is fixed by the local real estate association such as the Florida
Association of Realtors (FAR) or the California Realtors Association (CRA) and the National
Association of Realtors (NAR) but in the PH there is no law regulating PM compensation.

 Functions of the PM
 The property manager may be involved in virtually all aspects of the operation of the
property. Whatever is the form and status of employment, the functions of the PM includes:

 Administration – to handle the day-to-day administrative concerns of the property such as

records keeping, report generation, paying the property’s bills, monitoring the employees,

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 and generally overseeing the property’s operations depending on property’s type of service
[i.e. rental, leasing, hotel, parking, mall, etc]

 Marketing and Advertising – the metaphor of lease or rental spaces are perishable
commodities: they expire. Therefore, must be continually marketed so new tenants can be
found to take the place of those who exits. Lease periods range from one day for hotels and
motel rooms to several years for commercial properties. Residential apartments may be
leased for six months or few years. The general objective of marketing is to maximize income
though occupancy rate and rental price schedules. Although the two are usually in conflict,
so the role of the PM is to have them complementary. Shorter leases are better but there are
lull periods if not properly marketed. On the other hand, advertising of rental property is to
find tenants and the type of advertising vary from market segments such as signage, flyers,
bulletin boards, internet sites, news ads, open houses, etc.

 Tenant Selection – with a proper marketing strategy and advertising segments many tenants
would be attracted. PM must carefully evaluate each tenant applicant to ensure that
accepting the tenant is within the overall objective of the property and maximizing income.
Also, PM must not violate the fair housing and rental regulations not to reject applicants
based on race, color, religion, national origin or ancestry, sex or family status. In US, there
is an anti-discrimination laws. With the proliferation of tenant-thefts the PM must be very
cautious in evaluating tenants.

 Lease Negotiation
 The PM must be familiar with factors that must be resolved in a well-written agreement such
as:

 Amount od security deposits

 Due dates of each rental collection

 Nature of tenancy and its periods

 Increasing rental rates

 Who is responsible to maintenance?

 What are the permitted use and prohibited?

 How many people are allowed?

 Can the tenant allowed to sublease?

 Responsibilities about the local and national laws

 Are pets allowed?

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  Move-In Inspection
 When the agreement is in place, the next issue before turning over the keys is for the PM and
tenant to make move-in inspection. The inspection is critical because it will be the basis on
any claims and counter claims against the security deposits after the end of the lease period.
Any current situation of all parts of the property must be documented. Some PM use
photographs or video tapes to document property conditions at the start and finish of the lease
agreement.

 Property Maintenance

 Though some leases require that the tenant take care of the property maintenance and repairs,
the PM is usually responsible for ensuring that repairs are done promptly and correctly. Some
larger properties may have a property maintenance staff, while smaller properties will use
local repair contractors on an as needed basis personally prequalified by the PM.

 Physical management is divided into two categories: (1) maintenance designed to conserve
the property, and (2) rehabilitation and renovation designed to make the project more
competitive and adopt to changing market and economic viability.

 Rent Collection
 One of the most arduous task of the PM is rent collection to be current. If the tenant is late in
rent payment as stated in the lease agreement, the PM should make the following actions:

 Discuss the issue with the tenant and determine when the rent will be paid. The PM must be
familiar with laws and regulations in managing rental properties.

 If the tenant fails the obligations, begin the eviction process under local or national
regulations and process in eviction.

 Move-Out Inspection
 On termination of the lease agreement, the PM should inspect the premises with the tenant to
determine if the tenant is responsible for any damage to the property. Having a well
documented “move-in inspection”, makes the “move-out inspection” go smoothly.

 Security Deposit Returns

 After the inspection is completed, the PM is legally obligated to return any unused security
deposits to the tenant. The security deposit is the money collected from the tenant prior to
granting the occupancy that protects the PO from damages the tenant may cause or from
failure to pay rent as agreed. The Phil rental laws and regulations must be followed to set the
time PO has to return security depoist to the tenant.

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  Role and Functions of Asset Managers
 Another type of property manager that is becoming common in the real estate industry is
called “Corporate Real Estate Asset Manager”. Hereinafter we will call his as an “AM”

 The task of Asset Manager are often more complicated than the Property Manager because
the AM must operate within the framework of meeting the company’s strategic thrusts. The
AM are professional real estate specialist who provide wide range of real estate service for
the company, even though the company may not be ‘in the real estate business”. The AM has
four (4) major functions:

 Management

 Acquisition

 Financing

 Disposition of corporate real estate assets

 Management
 The management function of the AM goes beyond the facility management to include the
strategic decisions involving the real estate needs of the firm, can aid the operations unit in
strategic planning, acquiring and financing facilities aimed at improving profitability of the
company.

 Acquisition
 A professional AM can assist in targeting space requirement and design features. He can also
help site selection process, considering the complex factors involved with locating various
types of facilities.

 The AM also serves as the firm’s negotiator in reaching a final agreement when it comes to
leasing or buying additional space assets.

 Financing
 The AM advises the PO whether to lease or purchase a space facility. This decision involves
many factors including general financial status of the firm and whether the facility required is
a special-purpose building. The strategy known as “sale-and-lease-back”, frees up the firm’s
capital for use in its primary line of business.

 Disposition

 Another important part of AM’s job is to redeploy or divest property that is no longer needed
by the firm. This happens when reducing operations and consolidation or when replacing new
facility than the outmoded one and acquisition of facility attuned to market segments.

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  Parking Space Requirements (condo)

 Residential – minimum of parking ratio per National Building Code

<50 sqm – 1 parking : 8 slots

>50sqm - <100sqm – 1:4slots

>100sqm up – 1:4slots

 Minimum floor area

 Family dwelling

 Open market – 36sqm,

 Medium market – 22sqm

 Minimum Open Space requirement for residential subd

 9% of gross area for high density or socialized housing [66-100 family lots per gross hectare]

 7% of gross area for medium density or economic housing [66-100 family lots per gross hectare]

 3.5% of gross area for low density or open market housing [66-100 family lots per gross hectare]

 BP220 Minimum Lot Area

 Single detached – 72sqm economic, 64sqm socialized

 Duplex/Single Attached – 54sqm economic, 48sqm socialized

 Rowhouse – 36sqm economic, 28sqm socialized

 Minimum floor area – 22 economic, 18sqm socialized

 PD957 Minimum Lot Area

 Single detached – 120sqm open market housing, 100sqm medium cost housing

 Duplex/Single Attached – 96sqm open market, 80sqm medium cost housing

 Rowhouse – 60sqm open market, 50sqm medium cost housing

 Minimum floor area – 42 open market, 30sqm medium cost housing

ASSIGNMENTS [Form yourself into 5 teams, choose your members]

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Each team is assigned to interview Property Manager and report your findings on the following
peculiarities: Find out what are their main functions and Challenges?

1. Mall Tenant/Property Manager

2. Retail Store /Property Manager

3. Apartment Tenant/Property Manager

4. Hotel Property Manager

5. Condotel Property Manager

THANK YOU!!!

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