As an investor, when you first start thinking of owning real estate your initial focus is on how to buy the properties and how much money you will make from them. But, after you have operated your rentals for a while, you start to realize that how you manage them is actually the most important part of investment property success.
All buildings need care because buildings are made of complex networks of systems. There is never a shortage of opportunities for things to go wrong in a building. In the average rental property, you have to think of, at least, three categories of maintenance expenses: physical maintenance, services, and the financial obligations of owning the property.
Maintenance costs, if not properly managed, can result in negative income flow; your property will make less money than it is spending. If you let this happen, your whole reason for investing in rental properties will be defeated. But the possibility of financial loss is not the only potential issue you have to deal with when managing a rental property.
The other thing you must think about is the loss of time. Every landlord knows the feeling when tenants call at an inopportune time to inform you of an emergency in the property. The endless demand of your time can be a major issue because most people invest in properties to gain more personal freedom.
That’s why the management strategy you choose for your properties makes all the difference to the realization of your dreams of becoming a landlord. Most landlords start out self-managing their properties. But there are good reasons to consider a different way of managing the properties. One way is by hiring a property management company to look after the assets.
As a landlord, when should you start thinking of transferring oversight of your investment properties to a professional property manager?
When to hire a property manager for your investment properties
You want time and freedom
If you really want to unlock your property investment’s potential as a source of passive income, you should hire a property manager. Rental properties are not a 100% passive investment like stocks. But you can make the property as passive as stock by using a property management company. With this arrangement, you only need to concern yourself with the financials of the property.
You don’t want to fix toilets
Maintaining the physical components of the building is unavoidable work and sometimes you will literally have to fix clogged or broken toilets. If you don’t know anything about electrical, plumbing, HVAC, and all the other systems of a building, hiring a property manager will let you avoid these tasks without neglecting maintenance. You also need a property manager if you are hands-on with maintenance, but are not keen on doing it yourself.
You are just not cut out for property management
There are a lot of things involved in making a rental property successful. Two of the most important aspects of investment property management are tenants screening and rent collection. Your mechanisms for vetting prospective renters and your ability to get tenants to pay the rent on time will underline your rental properties’ success. If you have difficulties marketing the property and managing the tenants, it’s best to hire a property manager.
You live far from the property
Sometimes the best real estate investment opportunities will be found in a city or region far away from where you live. The only way to take advantage of those investment opportunities is by hiring a property manager to oversee the assets. Having a competent property manager will free you from the limitation of investing only in properties that are in close proximity to you.
Your portfolio has grown beyond your ability to manage
Your own success will eventually force you to hire a property manager. As your property portfolio grows, you will eventually reach the point where your personal abilities and resources will no longer be sufficient to manage the properties. When you get to this point, you have two options: you can either stop growing your portfolio or you can find a trustworthy property manager.
You don’t like dealing with employees
Even landlords, who self-manage their properties, also still need other people to work with them. That is because they don’t have the time and all the needed expertise to handle every single aspect of managing the property. The typical landlord will need a gardener, cleaner, and a handyman, among others. If you would rather avoid the hassles of managing these employees along with your tenants, you should hire a property manager.
You can afford the manager’s fees
Property management companies typically charge between 5% and 10% of what the property earns in rent revenue. If your property is making enough money to cover this additional cost, hiring a property manager may be a good idea. Moreover, since the manager’s fees depend on how much rent they generate, they will be motivated to make your property even more profitable.
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