Investing in real estate requires real estate investors to get smarter by the day. Problems that arise in the real estate investment business shouldn’t be left for long without solutions. Real estate investors (and landlords) often hear about professional property management but quickly dismiss the thought as they think of it as an added cost. Making money in real estate is about cutting corners and distinguishing between a profitable and a nonprofitable investment decision. Rental property management is of utmost importance as not all real estate investors wish to be hands-on with the detailed image of their tenants situation.
In the last three decades, professional property management companies have become more distinguished in the real estate market. They offer a service that can be used for all kinds of real estate properties.
What is professional property management?
Professional property management is delegating certain aspects of managing your income property to a company that specializes in that type of work. A major part of property management services is rental property management. A professional property manager will ensure the maintenance of the estate while generating a constant rental income on behalf of the property owner.
Why should landlords go for professional property management?
There are many ways that hiring a professional to manage your real estate investment property can be a feasible option. Here are a few pointers that you should know about before making your decision:
Knowledge of real estate laws in your city
A rental property management company would have extensive knowledge of all landlord-tenant laws in your area; they have previous experience and can help deter you from making any rookie mistakes. This would add value to your income property as most legal guidelines can be confusing to any newcomers.
Knowledge of rent rates and rental factors
A professional property management can help you determine the best rental rates for your income property. They can assist you in determining any issues that might result in your property remaining empty, not to mention that valuing your property too low can be costly to you as a property owner. They can help you get the best and the highest rental rates for your property using real estate property metrics, such as occupancy rate and vacancy rate.
Mashvisor’s rental property calculator can help both professional property managers and real estate investors use real estate property metrics to their advantage. It’s an easy tool that ensures you’re making the right decisions regarding your investment property.
Expertise in tenant screening processes
Receiving rental applications, screening the applications, and conducting credit checks and criminal background checks can be overwhelming and time consuming. Professional property management can do all of this for you. They will receive all calls concerning showing the property, receiving the applications, and screening them while conducting all checks and calling references to ensure you have the best tenant for your property.
Efficiency in cutting expenses
Property management firms have accumulated a list of vendors to make property repairs. Delegating investment properties to such firms relieves the owner of the responsibility of searching for the lowest cost of repairs for their investment property as professional property managers usually get discounts from such vendors for the large volume of work that they bring them in. This can include cleaning, plumbing, electricity, you name it. Many property management firms schedule preventative maintenance to avoid expensive repairs on the long haul.
Dealing with tenants issues
Most people lack confrontational skills, meaning they will avoid having a confrontation with others when they should actually confront them. Professional property management firms will take over that for you as well. They will negotiate with tenants on your behalf and enforce any terms of your rental agreement that your tenants might be breaking. Professional property managers can also take care of any phone calls, complaints, or emergencies that may occur with tenants. Ideally, you wouldn’t have to deal with any evictions in any form, as the property management firms will do it for you.
Managing multiple rental properties
Most real estate investors are likely to own more than one rental property and invest in different locations. For beginner and part-time real estate investors, managing multiple rental properties can be quite overwhelming. Moreover, some real estate investors might be into out of state real estate investing. Hiring a professional property management firm will ensure that all your income properties are getting the attention they need to assure profitability.
Why you shouldn’t opt for a professional property management?
This can be quite an issue for real estate investors as communication between the property managers and the property owner can be lacking due to the large number of phone calls and emails that these real estate professionals receive. Thus, a landlord must ensure that he has a specific person from the property management company to always communicate with directly to avoid such issues.
As a real estate investor, having to pay a certain amount of money to a property management firm every month reduces your cash flow and return on investment as it subtracts from your rental income. Paying for such a service for multiple rental properties can be quite an issue as it cuts through your rental income on a monthly basis, constantly bringing your cash flow down. You should research the average cost of property management services in your area. Most property management firms take a monthly fee of between 6-10% in addition to the first monthly rent.
No hands-on approach
Some property management firms may be managing rental properties from their desks, meaning they are not physically managing your investment property. This can be an issue for matters that require a physical presence on the property, such as annual inspections. Before hiring a professional property management firm, you must make sure that they have proper training and experience.
Should you hire a professional property management firm?
The benefits of hiring a rental property management firm lie in the detailed groundwork that landlords may lack the knowledge to conduct. However, the downside lies in the cost of the service as it cuts through your potential earnings and in the impersonal relationship that the firm may have with your income property. For a beginner real estate investor, we highly recommend managing your first few properties on your own; this will give you experience and help you identify the issues with your investment property in order to ensure a more lucrative rental income.
While investing in real estate, you need to research every possible way to cut any added costs on your rental property. We suggest studying the costs of the service and checking up on references to the property management firm ahead of signing any contracts.