Why do people buy investment properties? If you are looking to buy a rental property or you already own one or more income properties, what is the purpose of these investments? Clearly, you are not simply buying buildings for fun. Even if you enjoy doing it, there is at least one goal that drives your actions.
There are many reasons why people invest in properties and for each investor the reasons are different. One investor might invest to earn passive income and for value appreciation, while another could be planning for retirement or looking for a way to diversify their assets.
Regardless of what your reason for buying an investment property is, one thing is certain. You want to make money from the asset with minimal stress and you want your property portfolio to grow. Whether you achieve those objectives depends on how you manage your properties.
Your management strategy is the most important part of the equation when investing in rental properties. This is because owning real estate is not a “set-and-forget” kind of investment like stocks. Rental properties require the investor’s active participation in order to succeed.
Many property investors do not realize this fact when they buy their first property. Somewhere in the back of their minds, they know they have to maintain the physical structure of the building, advertise apartments to potential tenants, and manage those tenants. They may not know how much work it takes.
The way you manage your investment property is important for two reasons:
- It determines if the property is a passive source of income or not. Earning passive income is one of the major reasons why people buy investment properties. But real estate is actually a semi-passive source of income since it needs to be managed.
- It sets the ceiling on how many investment properties you can own. A single investor overseeing multiple properties has a limited amount of time and energy. The time comes when they cannot buy more properties if they want to retain their effectiveness.
These are the reasons you should use a management strategy that is the right fit for your goals. There are only two ways to manage an investment property. You can either self-manage or you can hire a property manager to see to the day-to-day running of the properties.
Hiring a property manager is the recommended way to manage your investment properties. This is the only way for investors who are intent on making the property a source of steady passive income and if they are serious about growing their portfolio of properties.
What benefits will a property manager bring to you as the owner of a rental property?
1. Excellent property maintenance
You will gain access to the best professionals and tradesmen in your area. The best technicians prefer to work with property management companies because those companies often have several buildings under management.
This is easier for the workers than dealing with several landlords who own one or two buildings each.
Furthermore, the property manager can command better prices for parts and labor because they buy in bulk. This means they can manage the physical structures of the building much cheaper than you can.
2. Higher occupancy rates
Property managers have the benefits of many years of experience, as well as, an extensive network. They can put these to good use to market the property better than you can. They will not only fill vacancies faster, but they are more likely to attract quality tenants.
Additionally, tenants tend to avoid properties that are managed by their owners. Tenants know that a property manager will be more objective than the owner, so there will be fewer opportunities for friction.
3. Find the best tenants
After years of dealing with different types of tenants, property managers develop a sixth sense for identifying tenants who will cause trouble. Their expert use of tenant-screening systems helps reduce the risk that they will lease to a tenant who will not pay the rent or who will damage the home. Being able to keep bad tenants out of the property protects the rental income from the property and also reduces the cost of maintaining the asset.
4. Help you maximize profits
Property managers know how to price your property to make it more competitive. They will help you set the right rental rates based on the quality of the property and the rental market in the area.
Additionally, the property manager will ensure that the tenants pay their rents on time and in full; they do a better job of preventing delayed payments than the owner. Moreover, they will look for other ways to make money from the property.
5. Knowledge of the law
The rules and regulations that govern rental properties and the relationship between landlords and their tenants vary by state. Also, these laws cover so many different things that it can be hard for property investors to keep track of them all.
Property managers are intimately familiar with these local laws. They know how to take advantage of those laws to protect the properties they have under management and the owners of those properties.
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