Who will manage the property?
Another important decision you’ll have to make when you acquire a rental property, is who will manage it. When it’s your first or only property, you’ll most probably be managing it yourself. (Usually, when you start acquiring more properties over a long period, managing them will take up more and more of your time, and you’ll have an easier time deciding if you should hire a managing agent company. Hiring a managing agent will also free you up to look for new property investment opportunities.)
If you’re managing yourself, don’t underestimate the time commitment required to do a proper job. You’ll have to place ads for potential tenants, show the units, screen prospective tenants, and choose them. And repeat the process each time a tenant leaves. Or worse, if you chose a tenant poorly, and they end up not paying their rent in a timely manner, or at all, you’ll have to go through the time and major expense of evicting them. In addition, you’ll have to make regular visits to the property to make sure the grounds look in proper order, ensure operating systems are in good order, no new dangers have arisen on the property (for example, loose steps or broken walkways ( a major source of lawsuits by tenants against landlords), all common area lighting is working, etc.
You’ll also be responsible for collecting rents. If you’ve chosen tenants well, no problem. If you haven’t – big problem. After all, this is a business you’re running, and it needs to be humming along, or else you’ll have cash flow problems paying your expenses. As part of your job as your own property manager, you’ll also want to stay in regular (at least once a month) contact with your tenants. Many times, tenants will not tell you about “small” problems they’ve been having with your property – until it’s a big problem. By being pro-active, you can scope out these problems when they are indeed small. So, for example, you can ask each tenant each month if there are any issues you should be aware of – for example, any small leaks going on in the unit, any bug problems they’re seeing, any safety-related issues (say, a constant flickering light that would indicate a potential electrical wiring fire hazard). By asking you’ll stay way ahead of the curve – and be able to jump on any potentially big problems when they’re still small – and easily (and cheaply) corrected!
Time versus money trade-off
If you decide to use a managing agent, know that their fee (usually between 10 and 15% of rents) is yet another expense to be crunched to see if it makes sense for your situation. Of course, as mentioned earlier, using one will free you up to continue building your real estate empire…And your time will be better utilized to create more wealth.
photos courtesy of williemandrell.com, bramptonguardian.com, sanantonioevictions.com