Keeping a real estate rental property occupied is a struggle that only a real estate investor could understand. The secret, in fact, to maintaining an occupancy rate is property management. However, the dilemma for many real estate investors is whether they should hire professional property management or do property management on their own.
Before you decide whether to hire professional real estate property management or not, you should know some facts first. Therefore, in this blog, we are going to talk about the types of investment management. Then, we are going to tell you more about the pros and cons of professional property management.
First: What are the types of investment management?
Essentially, there are two types of investment management in real estate: property management and asset management.
As for property management, it is simply taking care of the daily operations of the investment property. These operations include collecting the monthly rent and staying up-to-date with the property’s condition as well as keeping up with the tenants. This type of property management is popular in the residential real estate investing arena. It deals more with residential rental properties than with industrial or commercial ones.
Asset management is a bit different, though. It focuses on the financial aspect of an investment property. Its main goal is to minimize property expenses as much as possible in order to make a maximum profit.
Moreover, there is another type of professional property management that is less common. This type is called portfolio property management. This type deals with real estate business portfolios and investment portfolio diversification. Its main goal is to diversify a real estate portfolio in order to split the risks of investing in property.
All in all, the main goal for professional property management, regardless of its type, is to maximize profit. The only difference is the approach they take towards that goal.
Second: What are the pros and cons of professional property management?
A real estate investor should understand that there are pros and cons of professional property management. Sure enough, it is up to you to decide whether to hire a real estate management company or not.
The pros of professional property management
- They know the rules: Property management professionals know the exact regulations that rule the real estate investing business. They know the laws and the procedures. A real estate property management company will take care of any legal procedures regarding the tenants. Let us say that a tenant gets behind on rent. Your professional property manager will immediately take action by sending a rental arrear. Furthermore, if they think that they should take further action, they will proceed with an eviction.
- Education: A real estate investment management company will save you the time of getting real estate education. Yes, real estate education! There is no way for you to get into real estate management without knowing the ins and outs of a property. This includes knowing the tasks and learning to do the math associated with it. In order for you to be able to run your business the right way, you have to get to know your property.
- They are professionals: Having your investment property in the hands of real estate professionals is the best thing you could do. They know the business and know how to manage a property to make it profitable. This also includes marketing. Marketing is one of the major aspects of running a property. Residential property management companies will make sure to do proper marketing in order to keep your property occupied.
- They have a certified staff for emergencies: A big part of real estate property management is staying on call 24/7. Therefore, a property management company will save you the efforts of doing so by providing staff who is ready to answer the call at any time.
- Flexibility: Having a professional property management company taking care of your property will save you a lot of time, especially if you are a part-time real estate investor. You could rest assured that your investment property is generating passive income, while you are at your full-time job.
The cons of professional property management
- Communication: An essential part of your responsibilities as a landlord is communicating with your tenants. Therefore, hiring a professional property manager might not be the best option in this regard. He/she could get too professional and lead to miscommunication with tenants.
- You still have some managing to do: Hiring a professional property management company does not mean that you get your hands off your real estate investing business. It only means that you get to skip performing some tasks that might consume your time, while you take care of other things. However, you will still have to keep up with your property manager. In other words, you manage your property manager in order to keep track of your business performance.
- Your investment property is your baby: When you started in real estate investing, you had a certain vision for your business. You should know that no one will do it exactly the way you imagined it. Your business is your baby, and no one can take care of it as you would want to.
- Property management fees: Even though hiring residential property management is a great way to make passive income from property, it will reduce your profit margin. You have to keep that in mind when you do your calculations. Most real estate investment management companies charge the first month’s rental income and 8-10% of the rental income each month after that.
What to look for in the right professional property management company?
As we have mentioned before, hiring a professional property manager is the best way to make passive income from property. Therefore, in order to be able to achieve that, you have to make sure that you hire the right one. Some of the ways you can check that are:
- Referrals: As a real estate investor, you know other real estate investors who have professional property managers taking care of their business. It would be a great idea to ask them for recommendations. Ask them why it is a good firm and for feedback on their experience with the firm.
- Check with the company itself: If you have a list of professional property management companies, then go ahead and contact them. Ask some major questions, such as about their clients, marketing strategies, the staff, and fees. The answers to these questions might be great indicators of how good a professional property manager is.
- Ask your tenants: After you have hired a professional property manager, ask your tenants about him/her. Make sure to ask whether they are pleased with the manager. Check on the company every once in a while and make sure they keep you up-to-date with the process.
Finally, to learn more about professional property management, check out Mashvisor’s blogs. You can also learn all about making a passive income from property.