For most property owners, real estate investment is a game of growth. Sure, a single property can generate new passive income and that’s an incredible win for your cash flow. However, building a long-term investment strategy usually means adding new properties to your portfolio. The more you grow and diversify your holdings, the stronger and more resilient your investments will become.
Yet, it’s exactly this growth step that proves to be the most difficult one for the average rental property investor. Strategy is one thing, but investors often find themselves caught up in landlord responsibilities that they didn’t realize could be so time and resource-demanding. And when your property holdings are small, managing them yourself can seem like an appealing option. You would pocket all of your rental income (rather than pay a property manager), and you’d also be able to keep a close eye on your investment properties. However, stepping into the landlord role could be a path towards flatlining your own rental income growth.
The Problem With DIY Management
To understand why a professional property management service is essential as you grow, just consider a landlord’s responsibilities. You have to fill vacancies yourself, market the properties, navigate legal issues, handle administrative documents, do walk-throughs and inspections, handle repairs and maintenance, and much more!
Pit these against the goals of a real estate investor, and these responsibilities don’t scale well. As an owner, if you only own one or two single-family homes, managing these tasks yourself might seem feasible. But add these to all of the other demands in life and you may find yourself quickly drowning in the details.
Hiring a cheap, amateur manager to work on your behalf might seem tempting as well. But in the property management business, expertise and professionalism go a long way. What you need is an experienced property management service that can take ownership of your properties and manage your homes as though they are their own. If you have to “manage your manager,” this only adds to your list of problems.
How Management Services Help You Grow
So now that we’ve established the importance of a bona fide property manager, let’s dig into the details. How exactly does a management company help you add new properties to your portfolio and develop your investment strategy? Here are four major pieces to consider:
- Collecting Rent & Handling Late Fees
The task of collecting rent when it’s due, tracking it down when it’s late, adding the appropriate fees, and processing rent payments (i.e. depositing checks and money orders) can be quite time-consuming. It can also be emotionally draining to feel like a ‘nagging landlord.’ You may end up thinking to yourself, “I didn’t sign up for this.” This is exactly the kind of legwork you should outsource to free up your valuable time.
A property management company handles all these tasks for you and can make the process very simple for both your tenants and for yourself by using an online payment system or portal. The best management services never hold back your rent in a reserve account. You always get paid the very same month your rent is collected, so your cash flow stays consistent.
- Filling Vacancies
One of the most important numbers in determining your income as an owner is your vacancy rate. After all, every empty unit in your property is money out of your pocket when you pay the monthly mortgage or insurance on your home(s). Filling those vacancies requires you to market the property, take calls from prospective residents, conduct walk-through’s with tenants, draw up the lease, fill out additional paperwork, and so on.
Letting a property management service handle this responsibility frees up your time to focus on the growth of your investments rather than on the investments themselves. Since Great Jones only gets paid based on monthly rent collected, we have a financial incentive to fill the space as quickly as possible with the best resident possible.
- Evaluating Tenants
As a landlord, placing tenants can often seem like a high-stakes gamble. The longer you wait to make a decision, the more money you lose on empty units. But rushing to a decision and choosing the wrong tenant (i.e. someone who doesn’t treat your home respectfully or vanishes midway through the lease) can end up costing you even more money. Many owners may go with their ‘gut feel’ about potential tenants, but a ‘gut feel’ isn’t always the safest bet.
A much smarter approach is to outsource tenant screening professionals. Management services place thousands of residents every year and can call on their experience as well as their database to make data-driven decisions about the right tenant for your property. Our assessments go well beyond the standard lease application. We run criminal background checks, look for issues with prior landlords, personally call up references, and more to ensure that you receive a highly qualified, trustworthy tenant.
- Handling Repairs and Maintenance
For a new property owner, the responsibilities of handling services and maintenance can be a real shock. First, there’s routine maintenance. You have to replace HVAC filters and clean ductwork, remove leaf, litter, snow and garbage, or maintain shared facilities (e.g. the pool or gym). Staying on top of these tasks not only keeps your tenants happy, but also keeps you on the right side of the law. With multiple properties, merely tracking and overseeing these recurring tasks can be a major commitment of your time and resources. Mix that in with emergency repairs and every time a toilet backs up, pipe freezes, roof leaks, or lock jams, it’s on you to fix the problem immediately. If you’re new to property ownership, you might be astonished by just how many of these calls you’ll receive in the span of a few months.
A professional management company takes all of these tasks off of your plate. It’s their responsibility to handle both routine maintenance and emergency calls and the best agencies give tenants multiple ways to get in touch and respond to crisis calls 24/7. That means instead of scrambling for a plumber when a toilet overflows at 2 AM, you can sleep through the night. We’ll take the call, get an emergency fix in place, and let you know that it’s already been resolved or review service options in the morning. In other words, you stay in the loop and still make major spending decisions, but leave the heavy lifting (and sleepless nights) to us.
The Bottom Line
Now that we’ve reviewed what management companies can do for you, let’s step back and take stock. One thing you might notice about all of the tasks above is that they don’t just save you time and money – they take your mind off of wondering whether or not your properties are being cared for or if you’ll be able to keep your rental occupied.
Freeing up headspace to make major decisions and check out new investment opportunities is key to your growth as a property owner. More importantly, rather than drowning in the logistics of your investment, it allows you to enjoy the ride and enhance your quality of life. Isn’t that one of the main reasons why you became a property owner in the first place?
For more information on the services Great Jones provides, get in touch with a portfolio advisor.