A real estate investor with one or two properties may not find it necessary to acquire property management services, but at what point should an investor consider adding this to their overall business strategy?
Property management companies are designed to maximize the profits of any real estate investment, while also minimizing the amount of time an investor needs to spend on administrative tasks.
Property management services vary from firm to firm, but the most experienced property management companies include a comprehensive marketing program, maintenance and collection services, as well as record-keeping and reporting.
Choosing a property manager for your real estate investments is a large, important step in your real estate investment journey. Consider the following to determine if now is the right time to hire a firm that offers expert property management services:
How Many Properties Do You Own?
In most cases, a real estate investor who is beginning with one or two single-family residential properties will not need property management services. However, as you grow your business and purchase additional properties, it will become more difficult to manage them on your own.
For example, if you own an apartment building with 10 units or you own 10 duplexes with two units in each building, you may find yourself inundated with requests from tenants on an hourly basis. The more units that you are trying to manage, the more tenants you will have, and the responsibilities will increase exponentially.
Real estate investors who intend to use their properties for full-time income can almost always benefit from expert property management services. A qualified property manager will eliminate the administrative tasks associated with real estate investment properties, and allow you to focus on the larger picture as you acquire more properties for your portfolio.
There’s not set number of properties in which a property management company would be required, but you may find that after you have purchased several properties that you are ready to take this next step.
Where Are Your Properties Located?
Not all real estate investors purchase properties near their home or office. In fact, many real estate investors have properties spanning across the state and even throughout the country.
Managing properties that are located hours — and sometimes days — apart can be nearly impossible for an individual real estate investor. It can make it difficult to access tenants when they require maintenance services, and it can be challenging to monitor the activity at the property.
Real estate investors who have properties scattered across the region would benefit greatly from property management services. Property management companies have the resources available to market all of your properties, to connect with your tenants and to protect the value of your real estate investments.
What Are Your Personal Strengths and Interests?
Like all individuals, every real estate investor is different. Some real estate investors begin purchasing properties because they enjoy the hands-on work associated with updating those houses and transforming them into homes for their tenants. Others love the thrill of the chase, but they are not handy with their power tools.
Real estate investors who prefer to spend more time searching for new potential properties in the market than managing tenant requests and taking care of maintenance issues would be wise to hire a company that specializes in property management services.
As a real estate investor, you need to take the time to decide how your personal interests align with your real estate ventures. An individual can make an excellent real estate investor because they can see the diamond in the rough, but that doesn’t always mean that they will be the most effective property manager.
If you feel like your personal goals and interests are more suited to an investor who hunts for the next great property rather than the hands-on landlord that you would need to be without a property management company, then now is the right time to start searching for a qualified property management company to help you run your investments.
What is Your Current Availability?
As your real estate portfolio grows, the amount of time that you have available will begin to quickly diminish. Marketing properties, screening tenants, managing maintenance requests and dealing with the bookkeeping can require long hours — and you simply may not have those hours to give.
You need to seriously consider whether you can juggle regular requests from your tenants with financial record-keeping and monitoring the market for new potential properties to acquire.
Many real estate investors who own several properties find that they do not have the availability to effectively manage the day-to-day tasks associated with property management along with the long-term tasks required of a committed investor.
Recognizing that you do not have the availability to commit to quality management services is one of the first signs that it is time for you to take the next step and begin choosing a property manager for your business.
How Much Revenue Do You Generate from Your Real Estate Investments?
Ultimately, property management services are an investment in your business. Property management companies will charge fees for the properties that they manage for you, sometimes upwards of 5-10 percent of your total revenue.
If you are starting to think that now may be the right time to hire a property management company, you should begin to assess the revenue that you generate from your properties. Real estate investors that generate significant monthly revenue from their properties often find that the fees associated with property management services are well worth the investment in their business.
To put it simply, real estate investors who can afford property management services should in fact hire a qualified property management company. By partnering with the right property management firm, you will be able to grow your investment portfolio in a way that would not be possible without the expert assistance and guidance of a property manager.
Now that you have decided that it is the right time to begin interviewing property management companies, you will want to know what to look for in a property manager. These tips can help you narrow down your options when choosing a property manager:
- Interview at least 3 to 5 different property management companies. To select companies to interview, ask for referrals from colleagues in the industry and conduct an online search.
- Ask each company to provide you with examples of current properties they are managing. This will give you an idea of what types of properties the company is familiar with, and will help you decide if this is the right fit for your investments. Select a company that works with properties in the same price range and location as your existing investments.
- Discuss property management fees at-length. Each property management company will have different fees, and it’s important to understand all of the costs associated with each company.
- Verify that each property management company you consider is certified and licensed. This helps protect you and your investments.
- Make sure that your goals align with the goals of the property management company you choose. Both you and the property manager that you choose should be dedicated to securing qualified tenants through expert marketing efforts and to maintaining the properties so as to protect the investment.
Ideally, you will be able to hire an experienced, qualified and dedicated property management company that will help you succeed as a real estate investor. This decision is one of the most important ones you will make as a real estate investor and will have a direct impact on your ability to grow your investment portfolio.
For more information on how we can help you succeed as a real estate investor, contact us today.