To build wealth quickly and maintain wealth over time, you need a diverse portfolio that includes a number of types of assets — to include real estate. Holding physical real estate assets, like land, residential property and commercial property, is a good way to build equity, increase cash flow and hedge your wealth against inflation. However, as you begin the process of acquiring real estate property, you need to answer a critical question: Who will manage it?
However, whether you invest in buy to let, or look into HMOs, you’ll need to answer a critical question first: Who will manage it?
Jasen Edwards, licensed real estate agent at Agent Advice said, It sounds like a good idea to self-manage a property. But being a responsible landlord takes time and effort. You may also not realize the required time and work when dealing with tenants or buyers. Self-managing will not be ideal if the property isn’t your only career or you have many properties to manage. It is important to hire a property management firm like Sunrise Realty to look after your property. You may be doing financial harm by not outsourcing your property management tasks. Firm experience and professionalism can help you save time and money. You can use the saved time to focus more on your other businesses. Eventually, you end up getting more profit without having worked so hard.
Unlike other types of investments, which involve an abstract element of ownership that require no upkeep, physical assets like real estate typically demand some form of maintenance to generate income. In most cases, real estate management involves renting properties — and all the responsibilities associated with renting, to include filling vacancies, handling property maintenance and setting and collecting rent. Depending on the size and scope of the property, real estate management can be a full-time job.
There are pros and cons to both outsourcing property management and retaining the responsibility of property management for yourself. Here is a guide to help determine the best course for your real estate investment journey.
Why Manage Your Own Property?
The most common reason compelling real estate property investors to manage their holdings themselves is: money. Professional property management takes a percentage of the monthly earnings of a property — usually between 8 and 12 percent of the rents. What’s more, some property managers impose fees for certain activities, like renter placements or annual renewals. With smaller investment properties, this can cut into revenues considerably, and because smaller properties are easier to manage, many owners are eager to assume these responsibilities for themselves.
Though investors are legally allowed to manage the properties they own, professional property managers must be licensed and certified to ensure they understand laws and regulations of real estate management. Unless an owner has functioned as a property manager prior to their personal investment, they will need to engage with a few real estate online courses to better understand the rules associated with this position.
By assuming the role of the property manager, an investor has complete control over their real estate holding. They can choose which renters to allow, which maintenance providers to work with, which updates are completed and more. In doing so, owners can learn more about the costs and benefits of property management, perhaps improving their investment strategy moving forward.
Why Outsource to a Property Management Firm?
Not every real estate investor wants to have complete control over every aspect of their property. In fact, many investors are happy to be as hands-off as possible, reaping the benefits of owning property without assuming much of the risk. For these owners, professional property management is ideal.
Professional property managers overtake most of the work — and a large amount of the risk — associated with real estate ownership. Even for smaller properties, management can require several hours of attention and effort per week, which many owners cannot spare. Poor decision-making in property management can quickly result in a negative cash flow; fortunately, professional managers have experience in decision-making that results in reliable income, reducing the risk that owners assume when purchasing and holding property. By outsourcing property management, investors gain peace of mind and more time to dedicate to higher value tasks, like identifying new investments.
However, it is worth noting that utilizing a property manager does not make property ownership entirely passive. This is especially true if an owner chooses to work with an inferior management firm. Many property management companies are either inexperienced or unscrupulous; they might not be effective at filling vacant units, finding reputable repair and maintenance services or communicating with owners and tenants. As a result, owners need to dedicate some energy to monitoring the efforts of their property management firm, at least until the company proves itself competent. Even then, properties require near-constant updating to entice renters and increase rents.
What Should You Choose?
Every real estate investment situation is unique, so there is no objective right answer to the question of whether you should hire a property management firm or do it all yourself. As you ponder your options, you should consider your time and interest in managing your real estate properties, and you should investigate the prices associated with reputable property management firms in your area. At the intersection of cost and value, you will find your answer.
