Financial Advantages of Using a Property Management Company

If you’re new to the lucrative world of real estate investing and feel it would be more cost-effective to manage your properties and tenants yourself, we suggest diving into this article that details the financial advantages of using a property management company. You see, managing an investment such as this entails much more than just collecting rent; it includes a whole host of responsibilities that are better left to the experts who know how to minimize costs and financially burdensome situations to maximize profitability.

Financial Advantages of Using a Property Management Company as a Real Estate Investor

If your goal is to be a successful and profitable real estate investor, then it’s certainly worth considering the financial reasons behind hiring a property management company. In this article, we’ll explore the various ways that an experienced management company can help save you money, increase your profit margin, and assist in keeping things on track for achieving your investment goals.

1. Consistent Maintenance Helps a Property Retain and Boost its Value

One of the jobs of a property manager is to take care of a rental property through preventative maintenance, timely repairs, and periodic walk-throughs to inspect for any potential issues. That said, many investors may not realize it, but a property manager being on the ball with maintenance issues can actually help prevent the property from decreasing in value and keep it on track for appreciating.

Hiring an experienced professional who deals with repair issues on a regular basis can mean the difference between a manager quickly attending to a leak repair and placing heaters to prevent mold growth, to an owner who’s managing the property themselves not being on the ball and later having to tear out drywall to remove dangerous mold. As you can imagine, the second scenario would be a time-consuming and costly task.

Property managers are responsible for ensuring maintenance and repairs are carried out, even at 2 am, when an emergency call comes in about a busted heater in the dead of winter. In contrast, a property investor typically has other things going on, and their interests normally don’t lie in repairing stoves and HVAC systems; but instead they are more concerned with growing their portfolio.

So, it can become a problem when an investor is constantly pulled away to deal with tenant issues. This is especially true when they own multiple properties because it can become tiring and take away from time spent making other lucrative investment opportunities happen.

With all that said, what would be a more financially effective approach? Dealing with the repairs yourself, possibly from across the country, or having a professional property manager who lives within the same city take care of these matters for you in a cost-effective manner?

Staying up-to-date on repairs and regular maintenance checks is crucial not only for keeping the rental in good shape, which, in turn, keeps its value on an upward path, but also for making sure the property is on track for regular rent increases. While we’re on the topic, if you’re interested in learning how to plan for rent increases, see our article that discusses rental property upgrades that make financial sense when it comes to increasing a property’s value.

2. Professional Management Companies Ensure Vacancy Rates are Low Which Equates to a Higher ROI

A rental property’s vacancy rate can, in many cases, result from the property’s current or potential maintenance issues. However, as mentioned, a good manager can quickly resolve any repair issues before they have a chance to get out of hand. But what about vacancies caused by tenant turnover? Well, a seasoned property manager has the experience and resources to ensure a new tenant is placed as quickly as possible, which can literally save you thousands of dollars.

Now, if you were to attempt to handle this yourself, just imagine trying to fill a vacancy as a busy investor who doesn’t have the knowhow to streamline the process. It would be a tedious task to find a trustworthy tenant, and before you know it, six months pass by at $1,300 a month, resulting in a loss of $7,800. This is money that a tenant would have been paying toward the mortgage, but instead, it’s now coming out of your own pocket – are you starting to see the big picture?

On a related note, investors who want to ensure low vacancy rates should invest in a location with a high demand for renters, as discussed in our article – New Construction Build-to-Rent Properties are a Good Investment with a Skyrocketing Demand.

Let’s turn the situation around and have a property management company handle things. A company that knows all the steps they would need to take to ensure shorter vacancy cycles occur, with a goal of seamlessly having one tenant replace the other. For instance, property managers are experienced in marketing strategies that attract a good selection of tenants. This includes creating professionally written ads, taking attractive property photos, as well as having productive open houses.

3. Tenants Stay Longer When Taken Care of Resulting in Steady Cash Flow

Having a steady, lucrative cash flow may be why you started investing in real estate in the first place. If this is the case, then you’ll appreciate the fact that a property manager can increase the chances of a tenant staying in your rental for the long term.

A high tenant retention rate is an essential financial advantage of using a property management company. It basically all comes down to keeping the tenants happy. This is accomplished by ensuring the property is in great shape and addressing issues quickly so the tenants can enjoy their stay and have a comfortable place to call home.

On the other hand, if constant issues arise that are not being taken care of promptly and the property is falling apart, the tenant will be unhappy and start looking for another rental. If this were to happen, then the investor would have a costly vacancy on their hands. To sum this up, the longer a tenant stays, the less tenant turnover an investor will have, resulting in more money in the bank.

4. Seasoned Property Managers Maximize Profits by Keeping Legal Issues at Bay

One of the more important financial advantages of using a property management company is that they know the ropes when it comes to complying with the many federal, state, and local housing laws. These laws can result in hefty fines if not complied with, and this can cut into an investor’s passive income. Also, with a property manager having a reliable tenant screening process in place, they can weed out bad tenants that may lead to legal issues such as evictions.

If you, as an investor, decide to take on the property management role yourself while not being well versed in housing laws, as well as having a lack of experience in preventing lawsuits from your tenants, then you’ll be opening yourself up to potential massive financial losses. This is why it makes much more sense to hire a property management company that can handle it all – the cost far outweighs the risk and potential financial losses that can occur.

Additional Financial Benefits of Utilizing Property Management Services

• Setting the Right Rental Rates that Maximize Profits: The rent is the lifeline of the property. It’s the investor’s passive income and cash flow, and is often used to save for retirement. Because of this, it’s crucial to set the maximum rate, and property managers are skilled at reading the neighborhood and the market to determine how much they can charge. They also reassess the rental rates each year so profits will continue to grow.
• Efficient Rent Collection Keeps Cash Flow on Track: Property managers handle all aspects of rent collection, know the ins and outs of keeping rent payments rolling in like clockwork each month, and often incorporate a tenant portal that streamlines the collection process. This is important because a break in cash flow can be a financial hit for any real estate investor.
• Secures Quality Tenants that Protect ROI: Experienced property managers utilize a stringent screening process that pulls in good, reliable tenants. This, in turn, protects the property and the investor’s ROI. The screening process can include employment verification, criminal checks, rental history, and the like. A bad tenant who stops paying rent or destroys the property could cost an investor thousands of dollars.

Ensure Your Financial Success with the Help of a Property Management Company

Seasoned investors know that managing a rental themselves will cost them time and money, and that hiring a professional property management company will put them on the path to financial success.

Here at Morris Invest, as a long-time full-service real estate investment company, we realize the financial value of having an effective management company in place. Because of this, we assign an experienced property manager to each rental property that we provide to our clients. In addition to this, a reliable tenant is also placed – this sets the investor up for financial success right from the beginning.

If you’re interested in investing in a fully done-for-you rental property where everything is taken care of from start to finish, please don’t hesitate to schedule a call with Morris Invest to discuss your goals or direct any questions our way. Also, head over to our Morris Invest & SDIRA Program Overview page for more information on how we help real estate investors get started, become financially independent, and grow their rental portfolio.

Before you go, grab a cup of coffee and dive into the video below that further discusses why a property management company is worth the expense:

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