Property Management: The Key to Successful Real Estate Investing

I started my journey in real estate here in the US a couple of years ago, when I had the opportunity to buy into an existing real estate investment, property management, and renovations company in Massachusetts and Rhode Island. At the time, the company did not have enough resources to manage all of it’s founder’s properties in fact over 60% of the properties were managed by third party management companies. We focused on building strong systems and efficient processes to bring all the assets under our management. This would allow us to have more control over our investments and execute our investor’s business plan more efficiently. We also set out to grow our renovations and maintenance teams to have the confidence to take on more value-add opportunities. What I quickly learned in this business is that Real Estate investing is not as passive of an income stream as people claim it to be. In this article I would like to highlight the importance of property management.

 

Unlike investing in the stock market, success in real estate requires a lot of effort from investors to be successful. I frequently interact with property owners that invested in real estate expecting steady cashflow and appreciation from day one with very minimal effort on their part. This cannot be further from the truth. Property management whether you do it yourself or hire a professional is crucial for your success. Without proper property management your investment could very quickly turn into a major liability and lose value as a result.

 

Before buying your first rental property you need to make sure you have plans for its management. Do you plan on managing the investment yourself? If so please consider the following;

 

• How close do you live from your investment?
• Are you available 24/7 in case of emergencies?
• Do you have enough time attend to manage tenant requests, rent collections and delinquencies?
• Are you familiar with all state and federal laws and procedures that govern tenant/landlord laws?
• Are you able to conduct regular inspections to make sure everyone is following your communities’ rules and regulation?
• Do you have a group of trusted and skilled vendors to assist with time sensitive maintenance requests and scheduled maintenance?
• Are you able to keep up with market rents while keeping vacancies low?

 

If you answered yes to all of these than congratulations you’re ready to manage your first real estate investment. If you answered no to any of them than you’re better off considering a property management company in your area. Here’s what to look for in a property management company;

 

• A company with a proven track record of managing properties similar to yours in terms of asset class; ie. commercial, multifamily, residential…
• A company that manages properties in your area; the more properties their team has in your neighborhood the more likely they are to drive by your property and make sure everything looks right, and therefore more likely to spot issues and be more responsive. Preventing an issue before it turns into a problem is key.
• How long they’ve been in the business; In this industry the longer you’ve been managing properties the more issues you would have likely encountered and overcome, and therefore the better suited you are to overcome these issues in the future.
• Online Reputation; It’s super easy to google your property management company and see what kind of reviews they get from both landlords and tenants alike.
• What kind of processes do they have in place? (rent collection, maintenance calls, owner draws). Property manager know now more than ever that tenants expect services that make their lives easier, whether its online payment systems, or promptness in maintenance requests. Tenants want good service always, and the better, more personalized service that your company can offer the more likely your tenants will continue to lease with you.
• What are their processes placing new tenants? Selecting new tenants is hands down the most important job. Make sure your understand your management company’s minimum requirements for new tenants. Do they provide any lease up guarantees? What do they charge for this service?
• What is the property manager’s fee structure?
  • Management fees; Is this a % of collected rents or flat fee?
  • Markups; Are these markups applies to all bills including utilities and so on? Is there a ceiling to the markup that could be charged on a particular job?
  • Leasing fees; Are they charging both you and the tenant for leasing fees? What about contract renewals?
  • Hourly maintenance; How much do these costs per hour and are you billed for travel?

Finally, whether you choose to manage your property yourself or hire a property management company, never lose track of your real asset; your tenants. Make sure you’re placing the right tenants in your units and treating them well, providing good service, and maintaining a safe and comfortable living environment as best you can. In this business you’ve got to treat all your tenants fairly, while at the same time maintaining strict policies, deadlines and regulations to build a mutual trust and respect.

 

Real estate investing is highly rewarding but requires effort, and good property management is crucial for success. Before buying your first rental property, consider if you have the time, knowledge and resources to manage it effectively. If not, hire a reputable property management company and turn your real estate dreams into reality.

 

Jason Rizk

Managing Partner

Longview Properties