So much about investing is written about finding the right property and making the best deal. That’s great and important information, however it won’t make your investment successful once you actually own it.
Being a successful real estate investor goes beyond just finding and acquiring quality deals. You have to manage those deals effectively to realize their full wealth-making potential. Mark my words, you can have the most incredible real estate holdings in the entire world, but if they are mismanaged they could quickly become worthless. Why is this? Because in order to be a successful real estate investor, the first rule you have to remember is that real estate values are typically based on performance, not on the asset itself. And, in order for your real estate portfolio to run at its maximum potential, you need to manage your property professionally.
Once your deal is complete, the property manager becomes the most important member of your team. Truthfully, the property manager is a major player in getting your investor to commit, but that topic is for another blog.
I have five points of wisdom to help you find the right property management team. Don’t take these lightly. The right team builds up your value, which in turn helps refinance and get you to an infinite ROI on your investment. The wrong team destroys your asset and flushes you down the drain with the property. Here are the five points:
1. Use your team. Business and investing are a team sport. If you don’t know of a reputable property manager that you can trust fully with your investment, then ask the members of your team. Chances are they will be able to refer you to an excellent company. But don’t take their word for it. As I always say, “Trust, but verify.”
2. Trust, but verify. If you were smart, you conducted a thorough due diligence on your property before you purchased it. You probably dug into every financial, scrutinized every lease, and walked every unit. You need to perform the same level of due diligence when looking to hire a property manager. Get a full client list, and interview the existing clients of the management company in question. Do they like the service they receive? Have there been any obvious mistakes or blunders you should be concerned about? Ask how the property management company has increased the value of the owner’s property. Also, interview the employees of the company and the potential on-property manager for your property. Make sure they are upbeat, knowledgeable, and a good fit for your personality. You will have to interact with these people on a continual basis.
3. Find the right fit. There are tons of different types of management companies out there, each with their own specialization. Some companies will specialize in commercial property management, while others will specialize in apartments. Some companies will be better suited for large properties; others will be a perfect fit for smaller properties. The point is that, even if you do find a good management company, they might not be good for you and your needs. You wouldn’t want to hire a large property management company that specializes in large apartment buildings to manage your duplex. They might be awesome at what they do, but your property would get lost in the shuffle—it would be too small for them to give it full attention. On the other hand, a smaller, local property management company would jump at the chance to manage your asset, and they would give you personalized service and attention.
4. You get what you pay for. Too often, people want to save money, and they balk at the fees a management company charges. Don’t. Management fees vary by market and property type and size. But I will say that if a fee looks too good to be true, it probably is. Every investment in the world, if it is managed, costs you money. The beauty of property management is that you at least know what the fee is. Often, with investments like mutual funds and stocks, the fees are hidden (and substantial) so you don’t feel them. You know what they say, “Ignorance is bliss.” But with property management, the fees should be clearly explained and spelled out up front. I guarantee that if you find a good company, it will be worth its fees.
5. Money matters. Make sure that any company you retain has a very good accounting department. When it comes to managing your investment, proper accounting is a must. You want the company that you use not only to understand what is going on with your property’s operations, but also what’s going on with your property’s finances. Also, make sure that your property’s money will be held in a separate account.
Nothing is more important to the success of your investment than good, knowledgeable property management. Oftentimes it is the difference between meeting your investment goals and losing untold amounts of money. Whether you manage your property yourself, or have someone else do it for you, don’t try to “save money.” That always leads to disaster and loss.
The good news is that now you know. And if your investments aren’t being properly managed, the solution is easy, and the ability to increase the value of your assets almost instantly is right in your own hands.