Well, buying income properties is not all there is to real estate investing. Though it is the first step, the second step is none other than income property management.
As you already know, there are property management companies that take care of that procedure for you. These companies will provide you with the real estate professionals who will make sure your rental property is operating well and that you are making a profit out of it. However, their services cost money, and that money is deducted each month from your rental income.
Related: Residential Property Management: Can Landlords Do It on Their Own or Do They Need Professional Property Management Services?
For this particular reason, many real estate investors prefer to manage their properties on their own. So, the question is whether you can do it yourself oryou need to hire real estate professionals to do it for you?
As you also know, already, income property management comes with many day-to-day operations. These include rent collection, staying in touch with your tenants, and many other tasks. So, in order for you to decide whether you can do it yourself or you need to hire a real estate professional, ask yourself the following questions:
#1. Are you willing to make dedicated time for income property management?
The number one reason for real estate investors’ fail is that they misunderstand the concept of income property management. They think that it is all about collecting the rent at the end of each month. However, that is not all there is to income property management. You must understand that property management requires time. Now, it is easy if you are managing one income property as it won’t require much time. You should also know that if you are managing your income properties yourself, you are on call 24/7.
In case you are a part-time real estate investor, we suggest you hire professional property management companies. Time is a vital factor in your business’s success, and you can’t afford to lose money. Professional income property management professionals are there to dedicate the time to take care of your investment property and increase your rental income as much as possible. Therefore, whatever you choose, make sure you are profiting and not losing money instead of saving it.
#2. Are you willing to make the necessary preparations?
As your own income property manager, you should make all necessary preparations. We mean this in terms of insurance and natural disasters in addition to any unexpected damages.
Keep in mind that another unexpected aspect is late payments by tenants. Your tenants might give you all the possible excuses for why they are late. So, you should be prepared for such situations and know what steps you should take towards addressing this problem.
Related: What’s the Legal Way to Deal With Rent Arrears?
#3. Are you willing to educate yourself on income property management?
Income property management is just as any other business or task: it requires proper education. In order to become one of the successful DIY real estate professionals, you should have enough knowledge. Income property management involves managing your real estate investment portfolio which consists of multiple investment properties. We know it sounds easy, but in reality, it is not that easy at all.
The education you need includes learning to do various calculations. These include calculating your rental income as well as dealing with recurrent expenses. Also, it includes keeping up with the income properties’ performance in terms of profits and losses. Therefore, you will have to learn to conduct investment property analysis to keep track of the financial performance of your investment properties.
Educating yourself of income property management also includes other procedure. It requires that you do all the proper paperwork as well as keeping copies of necessary documentation. Learn how to do so and what procedures are necessary besides that. You might also face a situation where you will have to take legal action, for example, evictions, which is a procedure taken in case of late payments. Thus, you should know how things work and what the right steps towards eviction are.
#4. Do you have the right connections?
It is impossible to operate alone in any kind of business. Similarly, the world of real estate investing requires that you have the right connections. When managing your own income properties, you will need to deal with all kinds of people. You will need to know contractors. Having multiple investment properties means multiple maintenance procedures. This also means that more expenses are going to be spent towards repairs. So, make sure you know the right people in order to get the best deals on repairing your income properties.
#5. Are you really saving money on income property management?
Now, this is “the question” to ask yourself. After all, are you really saving money by managing your own income properties? Know that we are not trying to talk you out of it. However, it is important for you to understand that not every DIY property manager succeeds. If you do not feel confident and do not have the required commitment to this field, then you might want to reconsider it. Sometimes, a real estate investor fails to manage his/her properties, which causes him/her to lose money. Real estate income properties are very demanding, and they require confidence besides knowledge. So, in case you are not confident enough, go ahead and hire professional property management companies. They are real estate professionals, and they know what to do in order to maximize your profits. After all, your gain is theirs as well, so it is in their best interest.
Related: What Are the Best Ways to Minimize Your Property Management Fees?
#6. How much do property management companies charge?
Usually, property management companies charge somewhere between 8-12% of your monthly rental income. Some might require that you pay the first months’ rental income and then a certain percentage each month. But you can always find a property management company that does not do that, so do not be discouraged.
Whether you manage your own real estate investment portfolio or hire real estate professionals, your goal is still the same. You are investing in income properties in order to generate income; therefore, the rest is a matter of proper calculations. After asking yourself the previous questions, decide what you want to do. Even if you decide to try it out to see if you are capable of doing it, it’s fine. Only make sure that you hire professional property management if you feel that you are not doing well on your own.
To learn more about owning and managing multiple investment properties, check out Mashvisor.