If you're considering handling your rental property on your own instead of teaming with a property manager, you may want to rethink your strategy. With the many factors involved in caring for a property and its tenants, it can quickly turn into a full-time job. Learn more about why a management team might be your best bet.
I speak to a lot of new investors, and there’s one mistake I see them make on a regular basis. Many investors think they can self-manage their properties when they first get started in real estate. This is a giant mistake—I call it “the Allure of the First Property.” If your plan is to grow your portfolio, you’ll want to place this job into the hands of professionals.
More often than not, these investors are simply looking for ways to save a few bucks and bring home more money. But a smart investor will build in the 10% property management fee to their ROI formula. For instance, if your property rents for $700/month, you can expect to pay $70 to your property management company. Let me tell you, it’s well worth the $70.
I've seen this scenario play out time and time again. Investors self-manage their first investment, then buy their second rental property and they decide to play landlord again. Maybe they had a great experience with the first property, but it almost never works out once the second property is under their belt.
Even if you were to luck out and get fantastic tenants the first time around, chances are the next tenants won’t be so great. If you’re not experienced, you won’t know how to properly screen your tenants and get the right person in your rental. Not to mention, things just get out of hand once you have multiple properties. It’s more tenants, more toilets, more repairs, and generally more to worry about.
Being a landlord is a full-time job. You should always think ahead, and play the long game with your properties—that includes reaching your Freedom Number. What seems easy with one property quickly becomes a nightmare while trying to juggle 15 or 20 properties.
Rental investing doesn't have to be hard. Plan from the very beginning to hire a property manager and put your passive income on autopilot!
Do: take the job of hiring a property management team very seriously. Your property management company is your right hand man! Without them, your passive income venture could be not so passive. Check out our list of 5 questions you should ask when interviewing a property management team.
Don’t: try to micromanage them. If you’ve done your due diligence with hiring, let go of all of the details. You hired this team because they’re qualified to screen the tenants, and collect rent. Don’t try to micromanage them. Don’t come to them with a list of additional demands or tasks. They know what to do, and how to do it!
Do: get on the same page about communication. Some companies use email, while others use text messages, or snail mail. Always get clear information about which team member you’ll hear from in each circumstance, and the method of communication they will use.
Don’t: be too impressed by flashy software. Software isn’t the most important qualification when it comes to managing rental properties. In fact, we even work with a team that sends a paper, handwritten check via email. Software can be helpful, and organization is important, but we prefer that our teams be more focused on cash flow than minor details like that.
Do: take care of the things they ask you to fix. When your team contacts you regarding a leaky faucet, rattling heat vent, or a broken toilet, give them the green light to fix those issues. It might seem like some of these complaints are small to you, but to your tenant, the little things compile. When you anger your tenants, you make your property management team’s job harder.
Don’t: be greedy with pricing. Your team is already established in the market, and they know what price is appropriate. Trust their judgment and experience.
Do: get your account numbers right, and give plenty of notice if you need to change your banking info. Most property management companies will pay your rent via ACH. If you decide you need to change the account where your rent is deposited, give them a heads up in advance.
Don’t: fall prey to the allure of the first property. Many investors think they can self-manage when they first get started in real estate. But if your plan is to grow your portfolio, you’ll want to place this job into the hands of professionals.
Do: fill out all documents in a timely manner. When you onboard with a property management company, they’ll send you a packet of paperwork to complete. This stuff is important! It’s how you receive your payments and important tax documents.
Don't: forget how crucial a property management team is to your success! Always treat them with respect, and do your best to make their job easy.
Without tenants, a rental real estate business cannot cash flow. In our real estate business, our philosophy is to treat our tenants well. We do this not only because we believe in treating people well in general, but also because we understand the importance of having tenants stay in order to produce monthly income.
Some landlords take a cavalier approach when it comes to their tenants. They know that their rental property is an asset that they own, and that their tenants simply rent from them. Personally, we believe that having a big ego like that is dangerous.
We like to remember that an important piece of our business structure is creating a great home for an individual of family to live in. We have to remember our main purpose: to provide a home for families. We want our tenants to feel at home in our properties. Because of that, our relationship with our tenants tends to be flexible—it’s a give and take. We certainly set boundaries, and we don’t want to be taken advantage of.
As a landlord, you will get questions from your tenants. Some examples are, "can I have a dog?" or "can I trim back these bushes?" Sometimes, the property management company will discourage you from approving these requests. However, we tend to use one guiding principle to make these types of decisions: will fulfilling this request make our tenant feel more at home?
If a tenant feels at home, they are more likely to stay long-term. The longer the tenant stays, the longer we receive consistent rent from that rental property. It’s important to remember that a rental real estate business revolves around humans.
Working with an experienced, qualified property management team is paramount to a real estate investor’s success. A property management company finds the right tenants, collects the rent, and does all the legwork so you don’t have to! It’s important to remember how valuable your property management team is, and to treat them with respect.
Occasionally, it seems that certain investors get a big head when it comes to dealing with property management. They fall prey to the mindset that they are in charge, and the team works for them. This is not good business practice, and it’s certainly no way to treat people.
It’s important to be kind, and remember that the property management team is comprised of human beings. We as landlords should treat our property management companies as team members. Without their hard work and dedication, we would not be able to do what we do. With the help of my property management teams, I’ve compiled a list of five things you can do to collaborate with your team and make their job as easy as possible:
- Fix the things they ask you to fix. This one is really simple—when they contact you regarding a leaky faucet, rattling heat vent, or a broken toilet, give them the green light to fix those issues. It might seem like some of these complaints are small to you, but to your tenant, the little things compile. When you anger your tenants, you make your property management team’s job harder.
- Let them do their job. You hired this team because they’re qualified to screen the tenants, and collect rent. Don’t try to micromanage them. Don’t come to them with a list of additional demands or tasks. They know what to do, and how to do it!
- Don’t be greedy with pricing. Your team is already established in the market, and they know what price is appropriate. Trust their judgment and experience.
- Get your account numbers right, and don’t change them last minute. Most property management companies will pay your rent via ACH. If you decide you need to change the account where your rent is deposited, give plenty of notice.
- Take care of all paperwork in a timely manner. When you onboard with a property management company, they’ll send you a packet of paperwork to complete. This stuff is important! It’s how you receive your payments and important tax documents.
Want to know more about dealing with property management? Check out our list of 5 questions you should ask a property management team!
Hiring a property management company is crucial to your success as a real estate investor. A property management company is an indispensable part of your team. Especially when you’re thousands of miles away from your property, you’ll need someone on site to take care of things. Managing a property, especially multiple properties, is a full time job!
I highly suggest putting this important job into the hands of professionals. Assign this role to someone who knows what they’re doing. A professional holds expertise about vacancies, rental prices, finding the right tenant, and more.
However, not just any company will do! It’s important that you identify a team whose goals align with yours. Remember, you have to assemble the right team in order for your experience to be passive.
Specifically, I like my property management companies to be focused on cash flow. My property management teams might not have the newest software. They might not have the best, most up-to-date websites, or convenient portals for me to view my information.
In fact, one company that I work with doesn’t even do direct deposit! They send me a paper check via snail mail every single month. But that’s okay with me, because that check is always on time. My teams are focused on collecting rent in a timely matter, and that’s what is important.
For more about hiring the right team for the job, check out this list of five questions you should ask a property management company!
Any new venture can be intimidating, and that’s certainly the case with real estate investing. I hear questions constantly from new or prospective investors who are worried about risk. Sure, there are horror stories about investors who lost it all, but if you play your cards right and put a few safeguards in place, you will are very unlikely to encounter issues.
In order to mitigate risk in real estate investing, you should know that you can’t do it alone. It’s important to build a strong team that is well versed in the areas that you are not. Without the right team in place, you’re likely to make some mistakes.
It’s also incredibly important to not overspend. Don’t overspend on the purchase of the property. Don’t go overboard with upgrades either. When you pour too much into your properties, you’re decreasing your overall return. Check out my videos on the top three renovations that are a waste of money, as well as how to determine how much to spend on a rehab!
Invest in the right areas. Personally, I like to invest in C class neighborhoods. The tenants are hardworking blue-collar Americans. If your tenants are stable, you’re more likely to have consistent rental income year-round.
Work with an experienced property management team. Find a company that will thoroughly assess the applicants in order to find reliable tenants. Work with a team that is local to your property and knowledgeable about the market. This will ensure great tenants and fewer vacancies. Want to know how to hire the right team? Here's a list of five questions you should ask a property management company.
Purchase your property in landlord friendly states. If you have to go through an eviction, you’ll want to be in states where the legislation is on your side. In states that favor tenants, it can be extremely difficult to remove a tenant who isn’t paying their rent.
If you follow these five tips, you'll be sure to mitigate risk in real estate investing! Want a foolproof investing plan? Book a call with our team! We'll set you up for success in the right markets with the right property management teams.