From short-term to long-term rentals businesses, the ultimate goal of investing in a real estate property is to earn profit. It can be a great way of making a passive income via real estate through rental income or appreciation, especially after retirement. However, one of the primary decisions with an investment property is its management – should you hire an investment property management firm or not? Both roadmaps come with their pros and cons.
It will surely be financially rewarding if you plan to manage the real estate investment on your own. But ultimately, there will be a huge burden of responsibilities on your shoulders. On the other hand, hiring an investment property manager will cost some bucks, but you will be free from the day-to-day responsibilities. This, however, is just a surface overview. To help you get a better understanding of each endeavour, let us look at the details of investment property management, how it works and what roles are involved in self-managing a real estate investment.
About Investment Property Management
A profitable real estate investment for passive earners generates a consistent cash flow, provides tax benefits, confirms an increased property value with time, and involves less responsibility. This leads us to rental property investments. Property management is a practice that involves hiring a third party to maintain the owner’s property, deal with tenants, and oversee other daily tasks. Additionally, in case of vacancies, it is the job of an investment property manager to look for good tenants and keep up with the residences’ status quo.
It is more beneficial for your rental portfolio to hire a good investment management company that will tackle signing leases, staying updated on building repairs, and renovations, collecting rent, and so on. Whether you decide to manage the real estate investment on your own or not, what’s crucial is to protect your property investment and avoid any maintenance issues that can later damage your profits. Now you might be asking yourself what core responsibilities are involved in property management and how managers work. Let’s find out.
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What are the duties involved in investment property management services?
From the long list of roles and duties of managing a property, here is an overview of the major ones.
Setting and Collecting Rent
The key task of managing investment rentals is dealing with rent collection after setting an ideal rent price for the tenants. One cannot set up a rent rate without knowing the current market trends. It should be set up to generate a good cash flow for the owner and attract the tenants. To come up with a perfect rent amount, the property manager will consider the building’s location, its best features or amenities, the average market value of the surrounding area, and so on. They will ultimately develop a defined system of setting, collecting, and adjusting the rent.
Additionally, tenants often start to default on rent. Late payments proceed even after strict penalties and deadlines can lead to messy situations like eviction. There isn’t much of a win-win situation for you if you are not familiar with the landlord-tenet laws, which is where a manager can come in handy.
Property Repairs and Maintenance
Maintaining a daily maintenance routine is the key factor that drives property investment owners to hire management services. Why? Simply because it’s tiring, it’s time-consuming. And handling a tenet’s complaints is not everyone’s cup of tea.
Property maintenance ensures that the property stays in its best condition and provides a safe environment for its residents. In addition to enforcing the occupancy rules, your job will also include investigating and resolving occupants’ complaints at any hour of the day. Routine maintenance and checkups include:
- Plumbing problems.
- Fixing wiring or appliances.
- Lawn maintenance.
- Patching drywalls.
- Pressure washing, and so on.
The vacant apartments are also to be updated and renovated accordingly. Managers can handle the cost of repairs after the authorization of investors or property owners. In addition to these basic maintenance duties, you also have to deal with securing the rental property by maintaining security devices and staying in contact with the security guards for updates.
Defaulters are not just slow payers; they also breach their leases by not paying rent for months or attempting other lease violations like causing property damages, keeping unauthorized pets, having frequent parties, etc. sometimes, the situation with defaulters can be handled easily with quick sales solutions for real estate agents. Other times, you might have to take legal action. An investment property management firm can handle this very well, preventing stressful situations for you.
Looking for Good Tenants
Through real estate digital marketing, a management company can easily find good tenants for your property, show them the units, and screen the prospective renters efficiently. Sourcing tenants require a lot of expertise, so you can consider it the most valuable prospect an investment property manager can offer. They also supervise the whole move-in and move-out process as well.
Another important task is financial management, from setting rent rates, repair costs, minimising taxes, invoice handling, and depreciation to analysing and calculating realistic profit goals. The financial objectives must be met while keeping the budget balanced. Bookkeeping services will surely add value to your business. So if the management services do not include bookkeeping, hire a good bookkeeper.
Providing Marketing Expertise
Good investment property management companies also have marketing analysts. These marketing experts know how to handle rental vacancies and attract good tenants, protecting your investment from any downfall.
Using Advance Tech
Using real estate digital tools has become necessary for today’s realtors and managers. Technology plays a huge role in property management. To stay organized and ahead of time, managers use social media marketing packages and property management tools to have enough time to handle finance and rent.
Cost of Hiring an Investment Property Manager
The primary concern of property owners is the cost of hiring management services. Their pay varies depending on the quality of services that they provide. However, for a general overview, keep in mind that the companies will charge around 8 to 12 per cent of the total monthly rent collected. For example, if the total monthly rent of your property comes out to be $1200, its 10 per cent management payment would be $120.
Furthermore, vacancy management requires more work, such as renovations and weekly inspections, so management companies have a fixed fee for this.
Self-Management vs Hiring Property Manager – Reflective Questions to Consider
Not everyone can self-manage investment properties because, in addition to investing time and effort, one requires a certain skill set. To better reflect on self-managing investment property, consider the following questions before moving towards the pros and cons of each option:
Are you efficient at self-managing investment property?
Because property management is a full-time job, you have to keep everything organized and manage it properly. That also means handling the challenging parts of the job, like handling tenants’ complaints and even processing evictions. If you have the right skills and mindset for it, then you can go for self-management of your investment property.
How much control do you want?
An important point to consider before hiring investment property management services is if you are comfortable giving third-party control to a third party. If you are keen to know and control every detail, self-managing is a good option.
Are you good at dealing with tenants?
The most appealing thing about rental properties for tenants is quick customer service. This means attending their calls late at night and fixing their plumbing issues ASAP. Ask yourself if you can handle it and if you’ve got enough outsourcing links to deal with such complaints effectively.
How quickly can you attend emergency calls and reach there on time? What’s your efficiency level in filling rental vacancies? All of these factors must be taken into account. Also, you cannot simultaneously be a people pleaser and a good property manager; one has to go.
Do you plan to turn investment property management into a full-time job?
Is owning and managing rental properties something you want as a career or just for earning some passive income? As mentioned earlier, self-managing takes up a lot of time, and it’s a full-time job. So unless you do not want to turn a career out of it, it’s better to hire real estate investment management services.
Can you afford investment property management services?
The biggest problem that comes with hiring rental property managers is the cost. You have to give almost 10 per cent of your cash flow to them, which means you might not be able to reach the ideal profit margin. If hiring management services is not a good financial option, don’t do it.
Advantages of Self-Management
When it comes to self-management, you are responsible for keeping your business profitable while performing your duties towards tenants. To make sure the property’s mortgage gets paid on time and everything runs smoothly, you have to take care of the following key aspects:
- Providing a clean and secure environment.
- Setting and collecting monthly rent rates.
- Digital marketing and manual advertising.
- Updating vacant apartments and finding good tenants.
But these primary tasks are not the only roles you have to perform. You must equip yourself with good interpersonal skills and knowledge of the local market trends. You are the one running and managing the business, so what matters the most at the end of the day is asset protection and good terms with tenants.
Now, keeping the roles and duties aside, self-management also has its peaks. Let us look at some of the advantages you can benefit from.
A Good Profit with Fewer Costs – By managing your investment property yourself, you not only save the hiring costs but can also look forward to a smooth monthly cash flow.
Tax Deductions – Another benefit for the investor is tax deductions that can later come in handy. Tax deductions include the overall costs of repairs, repainting, building maintenance services, contents insurance, etc.
Add Value to Business with Investment Property Manager
Starting a business in real estate can be overwhelming for first-time investors. For investors who plan to invest in multiple properties simultaneously, the most advantageous option for their business is to hire investment property management services. Bearing the cost of a property manager is better than facing a huge financial loss because of a lack of market knowledge. Here’s how it can add value to your business:
As we have discussed earlier, the biggest benefit for an investor is having less responsibility and, ultimately, less stress. You will have more time to take care of other aspects of the business and predict its future endeavours.
No Legal Problems
Managers always stay up-to-date with the recent laws on real estate investments and know better how to tackle any lawsuits. A management firm helps its investors with time-consuming legal processions and can handle it better on its own.
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Managed Vacancy Cycles
Experienced companies know how to keep tenants happy. Also, they have more reach for property marketing and tenet hunting. Ultimately they will ensure short vacancy durations and retain good tenants for a long while.
Better Processing of Rentals
Since managers have been in the business for so long, they keep the rental process streamlined. They know better how to maintain a consistent monthly cash flow and deal with rent delays accordingly.
How to hire a good property manager?
The best way to find the right rental property management services for your investment is to use your local network. Ask the top realtors in your area as well as friends or neighbours. Their prior experience can save you in screening and looking for a suitable management firm. Before hiring, ask them as many questions as you can in order to check their level of expertise. Also, ensure to check the testimonials of their previous clients and focus on both the positive and negative reviews to better weigh your options.
Investment property management is not easy and involves several duties that must be taken seriously. The cost of hiring management services is an investment as it is deemed to add value to your real estate business steadily. If you do not plan to turn property investment into a full-time job, identify your property management needs and hire a seasoned manager accordingly.