Investing in real estate is a huge decision to make. Just like other investments, you may not be sure if you’ll gain or lose. One significant factor in making the success of your investment is the way how it is managed.
There are lots of things that you may need to consider when putting up an investment. You may need to ask yourself if you can manage your property or you need someone to do all the job. Your decision may make a significant impact on your business and career as a property investor.
In this article, you will be able to know what are the things you might consider when planning to invest in real estate. Another thing that you may answer after reading this is the frequently asked question by investors; should property investors manage tenants privately or by themselves? Do they need to hire a property manager? If ever, how are they going to find a good property rental manager?
Things To Consider If You Want To Be a Real Estate Investor
Money is not the only important factor to consider when planning an investment portfolio, especially if you’re planning to invest in real estate property. You’ll also be investing your time and effort here.
We have collected some of the things that you should consider if you want to be a real estate investor. Here are the following:
Of course, you won’t be able to invest without money. Investing in real estate property would need a large sum of money. If you are decided to be an investor, you should be ready to lose it or GAIN a triple or even a hundred times of it.
Ø Time and Effort
Any investment needs to be exerted effort and time so that it will give a positive result. Investment is also a business. It will be your money-generating machine once it grows, so you have to put an extra effort into this plus a lot of time.
Ø Resources and Relationships
You need to have a large group of connections as well as great resources. Having those two will be your great weapon in winning the game in investing.
Ø Fighting Spirit
Investing is like gambling. Sometimes, you will get a great income and sometimes not, but what you need is a great fighting spirit that whatever happens and persistence, you’ll find a way to make this investment profitable.
Reasons Why You Should Not Manage Your Rental Properties
Maybe, as a property investor, you also want to do the first-hand managing of your properties to be rented. Doing so can save you a considerable amount of money for paying a property manager (Rental Manager), and you can have a personal interaction with your tenants, but there are lots of cons that you may consider when doing so.
Here is the list of reasons why you should not manage your rental properties:
You will need adequate knowledge of running a rental property business and legal knowledge to fulfill government requirements in managing tenants
Whatever we want to do, we need to know about it. We need to understand how to manage the business, what are the processes to be done, legal requirements, who you should contact if there is a problem, how to give an exact solution to your tenant if there is an issue, how to provide an exact computation needed, and many more. If you have no experience in any of these and you want to do all alone, then maybe, you should start studying the process now. Most importantly, you should have passion in becoming a rental manager.
It will take lots of your time
As I mentioned earlier, investment is like a business. It will eat up most of your time just to make sure that everything is in its correct place. If you don’t want to hire a rental manager, you just make sure that you don’t have any much more important commitment except to your family.
In our experience, you will be well off focusing on what you are passionate about as a property investor, that is how to buy the NEXT investment property. But, not to waste time on the existing portfolio.
It will measure your patience
Not all tenants are the same. There will be a good-payer and a not so good one; there will be a kind, and there will be someone so hard to understand.
What you need is long patience that whatever happens, you have to remember that customers are always right. It does not matter you own those properties, and the tenants live in your properties, you have to keep things professional and always should treat tenants within legal guidelines. Yes, tenants have rights; in some countries like Australia, tenants have very strong rights.
It can be stressful
Aside from those hard-to-handle-tenants, there are still lots of problems that may arise in your business in the long run. It can be stressful, especially if you have more than 5 residential properties with tenants to handle.
You may not have the best connections, unlike an experienced rental manager, has.
You can’t expect the best result that a rental manager can give you compared to your work, especially if you’re new to this business.
Remember, your job as a real estate agent is beyond collecting rent from your tenants and paying the accounts. You must manage the property maintenance issues and if there is a conflict should visit the Tribunal hearings too.
Let’s look into more in detail.
Why Do You Need A Rental Manager?
Before we talk about why we need to hire a real estate manager; let us first know the things that a real estate manager can do.
Here is the list of what they can offer:
- Rental market research and calculating how much your property should be rented.
- Finding potential tenants and screening them if they are qualified to be rent.
- For property inspection, ensuring the good condition of the property and reporting whatever is needed to be repaired.
- Collecting the rent from the tenants and ensuring that the rent is always on time.
- Finding the best and lowest bids of maintenance companies, from plumbing to handyman jobs, if there is anything that is needed to be repaired in the property.
- Keeping open communication with the tenants to easily know any problem.
- Communicating with tenants that are not good-payer, and any tenant that is hard to be with. The rental manager may be the one to deal with them for you and even to take them to Tribunal (Courts) on your behalf.
- Reporting the income generated by your investment, especially at the tax time.
- Giving the most accurate regular inspection reports about the property being rented.
Now, I think you agree to that hiring a rental manager is unquestionable. But when is the best time to hire a rental manager?
When is the Best Time to Hire a Rental Manager?
1. When you think you need to have a clear objective for your investment property.
The first question when you are investing, like when putting up a business, is what your objective is. For example, are you planning to sell the property soon, are you planning to subdivide the property soon, which involve a house demolition? Or you just hope to hold the property for distance future.
Once you don’t have an established strategy, you might encounter problems in the future. Why, because you don’t know exactly what you need to do.
Hiring a good property manager can help you with that. They are trained to do a perfect job in renting properties for a business to succeed.
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2. You need to hire a rental manager if you think your techniques in finding tenants are not good enough.
You have your ways, but rental managers studied how to find great tenants, how to maintain a professional relationship with them, and how to be straight with them.
They have their means, and you will be surprised that they can get lots of costumers that you never expected.
3. You may need a rental manager if you and your tenants have no smooth relationship.
If you keep on arguing with your tenants, it may result in a bigger problem in the future. Having a rental manager that will communicate with the tenants for you would be the best option.
You’re not going to hide from them, but you are just keeping yourself from anything that may result in a significant accusation. Let the expert do the job in communication and fix misunderstandings.
4. Rental management requires excellent account keeping skills
You may also need a rental manager if you think you won’t be able to calculate the exact income that you are getting from your investment, weekly or fortnightly.
We all know that it is not always money- generating; you also need to pay for the maintenance of your property and the taxes. Doing so many computations may keep you out of track away from your primary focus as a property investor; so, let a rental manager do it for you.
5. It is also time for you to hire a good rental manager if managing your business risks your health condition.
Exerting too much time plus the stress may be bad for your health, especially if you are not good at conflict management.
Yes, you will be paying a property manager a fee, but you have to remember that health is wealth, and preventing a heartache is always better than cure.
You have to keep in mind that it is better to give a chip of money to someone who is helping you than paying your hospital bill.
I just want to give a friendly reminder for someone who wants to be a real estate investor; love your health because whatever amount of money that you’ll get in your investment is worth spending for you and your family’s comfort than paying for medicine.
How to Find a Good Property Manager?
As you know, this is a hot topic amongst property investors, and even many may tell you the best ways on how to find a good or even the best property manager. But don’t worry because I also included in this article the ways of finding the best candidate for a property manager, not from books, but from my first-hand experience.
1. Firstly, list down the qualities and requirements that you need in a property manager.
Of course, what you need is someone that has experience in managing rental real estate plus the characteristics that will keep both of you in a good relationship.
2. Search for the property manager that you are looking for.
For formality, you may post for job hiring in some newspapers, real estate websites or even in some social media.
Since the internet is so powerful, you may be surprised that in one click, you will get thousands of applicants than through paper advertising.
You may also ask some of your friends or partners if they know someone good of being a property manager.
In this case, you’ll feel assured since this property manager has experience through a friend. But if your friends know no one, then you may still proceed to find the best fit.
3. Interview your selected applicants.
Based on their qualifications, you need to interview them so that you will know what are the things that they are capable of doing for your business by managing your tenants. Through interviews, you may check if they are the best candidate for what you are looking for.
You may ask them the following questions:
- How extensive is their experience in managing rental properties, Residential vs Commercial real estate?
- How they handle different situations or problems that may arise in the future?
- Why did he leave his last job? And, their references.
- What problems did he encounter, and how did he able to solve it?
- How much would he expect for the salary, including all costs and charges? Do they provide discounts when managing multiple rental properties?
- What else could he do for the business that others may not?
- And, why you should let him manage your property portfolio?
4. Select the best one for you.
Based on all the requirements that you have given plus their answer with your questions and your liking of the personality, you may now select the best business candidate for you.
If it is a new rental management business, you may also consider their character background based on the character references that they have given. Through these character references, you will be able to know how efficient this applicant is in his last job.
5. Talk to your newly hired property manager and discuss all the necessary things for him or their agent to learn.
Always keep good communication with him and make sure that he is compensated well because the success of one’s business can be obtained through the combined efforts of you and your rental manager.
Remember, good communication include both verbal and written communication. For written communications, some tools like WhiteSmoke, Ginger Online Grammger Checker, ProWritingAid and Grammarly Premium can be helpful. Follow the links to read what we got to say about them.
6. Provide constructive feedback about your experience of working with him.
If you follow these things, you’ll be able to find the best real estate manager that you wanted to have around you. You may also add some personal touch in hiring a rental manager if you still have something in your mind.
The Pros and Cons of Hiring a Real Estate Manager
Again, everything we do may give a big change in the result. Managing your rental properties or hiring a real estate manager is a decision that you may think not only twice or thrice, but you might consider thinking 10 times.
To give you the advantages and disadvantages of hiring a rental manager, I have compiled in the list below some of the most notable of them:
- You can double your return on investment (ROI).
Having a reliable and efficient rental manager can help you to double the return of your investment when you consider the amount of time you save by doing so. It matters the capabilities and the abilities of the rental manager that you’ll hire. Of course, it depends on you if you can get a good one to manage your investments.
- You can save lots of your time.
You don’t need to be as hands-on as before when you don’t have a rental property manager. Your manager can only contact you if there is a problem, something that needs improvement or needs your approval. You can give most of your time to your family and building your real estate investment portfolio grow.
- You can save your effort and energy.
Things like asking for tenants’ payment, asking for a report of needed repair, maintenance of the property or even assigning someone to collect the rent are effort and energy-consuming. Hiring a good and reliable rental manager can free you from any of these.
- They can improve customer satisfaction.
Due to their expertise, the rental manager can achieve your tenant’s expectation. They can transform your problems into opportunities. Since he is the one communicating with your tenant; you can feel assured that he will always be ready to answer everyone’s queries. It is his job to make sure that everything is in the right place, and everyone (including you) is happy.
- The hiring of a rental manager can add up an extra cost to holding your rental portfolio.
A rental manager won’t do his job without pay. Of course, you need to make sure that he is well- compensated so that he will do his job well.
A reputable and high-rated rental manager agency may cost more than a starting or independent rental manager, but regardless, they may give you the best result that you are expecting.
- You won’t do the first-hand management of your property.
Most of the investors wanted to have personal communication with their tenants to establish an excellent connection, but when you have many properties, such a relationship is nothing else but a hassle. Hiring a rental manager may keep tenants away from you and do so.
- If you are unable to find the right candidate as a ‘good rental manager’.
The worst part that you may encounter in hiring a rental manager is when you hired an inefficient one. You can observe that he is inefficient if there are always problems in your property that he cannot solve alone.
Another manifestation that you hired someone that is not good is when you realized that there is no improvement or growth in your rental income; instead, they charge you more for numerous expenses. Remember, some even try to charge for photocopies and telephone calls.
Hiring an inefficient property manager may lead you to a great loss, so you need to think hard if you are into hiring one. And, once hired, you have to monitor their invoices to make sure they do not try to ‘rip-off’ you.
If you want to hire one, please always have the best way of finding the best in that field, at least a good one.
Of course, you invested your money so that it’ll grow, so you have to choose someone who can make that growth possible.
These are the advantages and disadvantages of hiring a property manager. What you need to keep in mind is that no one knows what is better in your investment than you. You just have to follow what your heart tells you when making some decisions.
There is no wrong in asking for other’s help, especially if they have more experience and if they are more knowledgeable than you in managing their investments.
Remember that it is your money that is being talked about here. You could not blame others if you had a mistake in making a decision. Whether you want to hire a property manager, or you just wanted to run your own property management business, then you have to be ready with the result; may it be good or bad.