Buying a single-family investment as a real estate purchase has been a well-established financial strategy for thousands of years. You purchased or inherited a home or condominium and now you have to figure out how to get your arms around it. Perhaps you were transferred and don’t think it is time to sell the home yet, you want its value to appreciate more. From a management standpoint, you have two choices, manage the property yourself or hire a property manager to take care of it. This article will help you make a decision on which way to go.
Setting Investment Goals
First of all, realize that you need to set single-family investment goals. In other words, ask yourself what you intend to do with the property. If it is free and clear you could save the money you earn and invest in more real estate… or pay for college tuition for your children. When they are done with college you could use the cash flow to prepare for or amend your retirement plans. If you have a mortgage on your single-family investment you have less cash flow to meet your needs which will affect your decisions.
A Few Investments Goals to Consider:
- Hold the property until it is paid off and use the income for retirement
- Hold the property until the marketplace appreciates – then sell the property and:
- Reinvest in another property/ies (maybe in better locations)
- Take the money to the bank
- Spend the money you made
- Sell the property and use it to buy another home in another part of the country Refinance the property after some of the equity has grown and buy an additional home
Making the Decision
If you have time and are a hands-on investor, you will want to screen the tenants, make the repairs, complete the tenant turns and do the accounting yourself. More often than not, you get busy with life and don’t want to deal with the single-family investment yourself.
If you hire a property manager they deal with the myriad issues involved with property management for you.
What Property Managers Handle
Rent collection: They know what it takes to get the monthly rent collected from tenants. They deal with the tenants that won’t pay/ can’t pay, up to and including tenant evictions, something most landlords are unfamiliar with and very nervous about.
Tenant selection: More often than not they have screened the tenants before move in, evaluated their rental history and their credit history and established their ability to pay. Property managers are like you, the fewer tenant turns they have the better, and the more money you make.
Dealing with problem tenants: Sometimes a tenant goes through a divorce, a loss of a job, or some other crisis that turns them from being a cooperative tenant to an uncooperative tenant. Property managers know how to handle those situations and can typically solve problems related to difficult tenants.
Maintenance: Most property management companies handle property management emergencies 24 hours a day. They either have their own maintenance department to take care of your property or they have a vast pool of vendors that are prequalified to take care of your property issues. These vendors deal with many property issues from basic carpentry to plumbing, electrical, roofing and mold remediation.
Vendor selection: Property management companies have an extensive list of vendors they have good experiences with. Property managers need good results for their clients and take time choosing the vendors they work with. In addition, property managers are sensitive to property maintenance costs and look hard to find cost effective vendors.
Bill paying – financial reporting: Not only are property managers required by licensing laws to submit monthly financial reports to their clients, it just makes practical sense to know how your property is performing on a monthly basis.
Marketing of vacant units: Property managers have a deeper pool of tenants looking for rentals, enabling them to rent units faster than an individual owner can. It is good to find a company that invests in its website and search engine optimization (SEO) to find as many tenants as quickly as possible for their clients. However it is good to diversify your presence with a wide variety of digital and traditional advertising including our website which easily guides prospects to our available units. vFlyer pushes out gorgeous digital flyers to many well-trafficked rental websites such as Craigslist, Hotpads, Zillow, Trulia and more. We also upload flyers to Postlets, Rent.com, etc. Good property signage draws many inquiries as well.
Tenant discrimination: Property managers are focused on equal housing opportunity. They do not discriminate on the basis of race, national origin, color, religion, sex, familial status, handicap, source of income or sexual orientation. This protects the landlord from federal, state, county and city fair housing investigations and litigation.
Watching your property: Property managers have local offices so they can take care of your property and your interests when you are not available.
Compliance with laws: Property managers work hard to comply with the many federal and state laws. In that vein they have hundreds of forms that meet current regulations that are used in the day to day operations of managing properties.
Value: Property managers deliver a huge value for the small amount they charge. They pay for themselves every day the investor owns the property.
Making the decision to manage a single-family investment is not easy. If you have the time and skills it clearly makes sense to manage your own property, but it is challenging and you would want to become a member of a local landlord association to stay on top of the ongoing business changes. If you don’t have the skills, consider hiring a property manager.