Why You Need A Good Property Manager
[Image generated with Dall-E]
The goal of real estate investing is financial freedom.
Financial freedom requires a dependable income. The only way you will have a dependable income is if a dependable tenant continuously occupies your property. A dependable tenant stays many years, always pays the rent on schedule, and takes good care of the property.
Dependable tenants are the exception, not the norm. And, because you will own the property for many years, you will need multiple dependable tenants.
To achieve that, you will need a good property manager.
Tenant Selection
The only way you will have a reliable income is if a reliable tenant consistently occupies your property. A reliable tenant stays many years, always pays the rent on schedule, and takes good care of the property. Over the years of owning the property, you will need multiple reliable tenants.
Purchase a property that attracts tenants with a high rate of reliability. A good property manager can then select a reliable tenant from this pool.
How do you find a segment with a high concentration of reliable tenants? Through property manager interviews. If you would like to learn how feel free to contact me.
Once you identify a target segment, buy properties that match that segment’s housing requirements. You can determine the segment’s housing requirements based on what and where they rent today. From this, you can develop what I call a property profile. A property profile is a physical description of properties that this segment is willing and able to rent. A property profile has at least four elements:
- Location - The locations where significant percentages of the target segment are renting today. South Central, Southwest, north of the river, etc.
- Property type - What type of properties are they renting today? Condo, high rise, multi-family, single family?
- Rent range - What the segment is willing and able to pay.
- Configuration - Two bedrooms, three-car garage, large back yard, single-story, two stories?
If you buy properties that match the property profile, most people who apply to rent the property will come from the target tenant segment.
Property Evaluation
Even if a property matches the target segment's property profile, it does not necessarily mean it is a good investment. This is why you need a good property manager as part of the property evaluation process. Below is an illustration of how the property manager fits into our property evaluation process.
A good property manager provides three critical pieces of information you need in order to make an informed decision about a property.
- Rent range - A good property manager estimates the rent based on recent rentals and current competition. For example, if recent rentals indicate your property should rent for $2,200/Mo, but there are several similar properties for rent today for $2,000/Mo, your property will likely rent for $2,000/Mo. If you based your purchase decision on recent rentals, your return would be much lower than expected.
- Time to rent - Every time your property is vacant, it costs you a lot of money. Vacancy costs can turn what appears to be a cash cow into a dog. Assessing the long-term financial performance requires knowing how long it will take to rent the property.
- Segment-specific renovation list - Renovation is modifying a property to make it more appealing to a specific tenant segment. The goal is to increase the rent and decrease the time to rent. Renovation items are tenant segment-specific. Knowing what to renovate and providing cost/rent tradeoffs is a very valuable skill to investors.
Knowing these critical items, you can determine whether a property will meet your requirements. Without this inflation, you are doing little better than rolling dice.
Cost Management
A good property manager knows how to get work done by quality service providers at a reasonable cost. For example, two bids to replace the water line from the house to the street were around $3,500. The property manager has a long-term relationship with a plumber who did the replacement for $1,800. A good property manager saves you money.
Rent Collection
How and when to collect the rent depends on the tenant segment the property attracts. For example, for lower-income rentals, one of the cash payment service providers like 7-11 stores or Walmart might be the best option. Or, maybe the rent should be collected every two weeks. How and when to collect the rent depends on the tenant segment.
Evictions
The best way to prevent an eviction is to not select tenants likely to require eviction. Another way to prevent a costly and time-consuming eviction is motivating the tenant to move out of the property and avoiding the time and cost of an eviction. However, if an eviction is necessary, a good property manager will complete the eviction in the least time possible by staying on top of every stage in the eviction process.
Local Knowledge
Everything you learn from podcasts, books, seminars, and websites is general knowledge. You will purchase a specific property in a particular location, subject to local rules and regulations. A good property manager and a trustworthy investment realtor are the only sources of local information and resources.
Summary
Achieving financial freedom requires specific skills, contacts, experience, local knowledge, and resources. The majority of these are only obtainable from a good property manager. Without a good property manager, your chances of attaining financial freedom are greatly reduced. Contact me if you want to know how to find a good one.
