Property Management is the Reason You Don’t Invest in Real Estate

property management

One major factor that continues to hold back inspiring investors from taking the leap into real estate investing is the fear of property management.

Dealing with tenant calls, leasing, showings, tenant screening and emergencies may seem like an unrealistic task to investors also working full time jobs.

Who wants a call from a tenant because their Wi-Fi isn’t working interrupting their morning coffee?

The solution – Hiring a property management team to care for the properties like their own.

We will dive into the steps needed to find the right management company below.

Related Article: Taking the Leap | How To Start Your Real Estate Investment Journey

Expectations

All expectations need to be laid out when interviewing property management companies.

Some questions to ask yourself:

-Will they be collecting rent on your behalf?
-Will they have the freedom to handle simple repairs (up to $500)?
-Will they oversee major capital expenditures?

Some questions to ask the management company:

-What services do you typically provide to your clients?
-What does your day to day tasks involve?
-How did you handle a recent emergency?
-When was your lat vacancy – for how long?
-What was the worst tenant you had – how did you deal with them?

In order to find the right fit for your management needs, expectations will need to be set early and often.

Cash Flow

When searching for real estate investments run your numbers with property management listed as an expense.

Subtracting anywhere from 12 to 15 percent off your rental income will give a realistic number to the cost of on-boarding a management company.

Adding those management costs to your number projections will allow a snapshot of the property from a conservative view to examine if the property will cash flow or hit the benchmarks set.

Reviewing Production

Trusting a management company to care for your investment like it is their own means they need to produce.

They should be finding great tenants, collecting rent on time, have zero vacancies, handle emergencies with confidence and tenants should love living in your units. That is what they are supposed to do.

Going above and beyond starts from that baseline of production.

For example, a rental I personally owned was suddenly vacant when the tenant gave a months notice who was on a month to month lease. The tenant loved the unit and was sad to go but needed more space for her growing family. She recommended the unit to a co-worker and they jumped on it. The only problem, they were new to the city and did not have a car yet.  On move in day we were meeting at the unit to do the inspection and key exchange. The new tenant mentioned in her email she may be late as she was taking the bus there.  I thought that may be difficult with her luggage in hand so I offered to pick her up and drive her to the unit. They were staying at a hotel short term which their work put them up in. They tenant was more than pleased with the service.

That is a quick example of how a management company can go above and beyond the baseline of what they are expected to do.

Conclusion

In order to find the right property manager you need to understand what your needs are.

Your expectations on what the management company will be required to complete on a daily basis should be discussed in the screening process.

Cash flow should be calculated with eh property management expense included. Capture a realistic screenshot of the numbers when hunting for your next purchase.

Monitor the production of the management company. They need to produce. If they start to slip make sure to get on them or start searching for another option.

Author: Joshua Svec

Joshua Svec is a licensed real estate agent and Founder & CEO of Air Realty. Diving into the real estate industry at age 21, Josh purchased his first cash flow property while completing his Masters degree. Since then Josh has been involved with real estate investing, accumulating a portfolio of over 85 beds, property management, and sales. Josh’s mission is to teach sellers and investors every aspect of the real estate transaction to ensure they save big.

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