3 BIGGEST DOWNSIDES TO OWNING RENTAL PROPERTY:
As the Property Management Authority®️ in Southern New England, we at Nexus Property Management™ are dedicated to basic principles that help us view obstacles and conflicts as opportunities for growth and improvement. Through that lens we foster a can-do culture that is optimistic and solution focused. As General Manager Gregory Rice points out, “you will never know what is going to happen until it does”...Well, after building up plenty of experience over the year in becoming the largest property manager in Southern New England, here’s our scouting report on the three issues that will cause property owners the biggest headaches.
In short, humans are problematic by nature. We’re social creatures but we don’t always get along. We all have different objectives and when they don’t align there is potential for some serious disagreement and fallout. Be it a tenant who is advocating for what’s in their best interest or a vendor trying to make an extra buck, you need to deal with people and you need to learn to do it well.
To just spitball quickly: tenants, tenants’ friends and family, vendors, neighbors, town/city officials, town/city workers, insurance agents, lawyers, inspectors, the constable...real estate is a people business. All of these people, and more, will have their eyeballs or feet on your property. Therefore, it is essential to look at every interaction as a chance to build a positive relationship. Inexperienced homeowners look at people as problems, but through Nexus’ guiding principles we are reminded that dealings with people are possibilities and opportunities. By being respectful at all times you are working toward an outcome in the present while building toward a positive relationship for the long term.
Maintenance issues are 100% inevitable and they can be huge expenditures or wildly inconvenient if you don’t expect them. Over time, things just get older, outdated, broken, and need to be fixed or replaced. Remember that issue number one above (people) will be a huge contributor to your maintenance headaches. Even with an entire in-house maintenance team, it is impossible to stay ahead of maintenance issues...so be ready for them and have a plan.
To repeat, establishing positive relationships is key to long term success and that same maxim applies here. Tenants that feel respected and are listened to are far more likely to help you stay on top of issues that could become much more costly down the road. Common issues that we see go ignored include: flooring (safety issue that can be costly), dripping or leaking water (costly and potential for mold), painting, debris accumulating (becomes more costly as it piles up and will attract rodents), doorknobs (safety and security issues), window screens (safety, security, and animal issues), roofs, siding,...just to name a few we see often. So be sure to find reliable vendors that you can build rapport with and can rely on 24/7.
What makes maintenance issues so difficult for real estate investors is that they do not make you more money. No one is going to pay more to live in an apartment because they admire your new roof. But these things need to be addressed before they become bigger issues. They need to be handled efficiently on top of the necessities, so be sure to adopt that long term vision and plan ahead for the inevitable.
#3: UTILITY COSTS
Utility costs can be tricky because they are almost always out of your control. They are a reality we need to accept and adjust to. Water, sewer, gas, and electric are the common utilities that we think of. An inexperienced owner might try to get around these expenses by pinning them on the tenants and having them pay for them, but be VERY WARY of handing over responsibility for things that could be ruinous if not kept up with. For example, maybe you ask your tenants to pay your gas bill so you put it in their name, they fail to pay on time and next thing you know the building is without heat for a couple days in January and you’ve got cracked pipes in the basement.
In most areas, New England included, utility companies have a monopoly or near monopoly so prices may skyrocket over time without a competitor to drive prices down. In Pawtucket, Rhode Island, we’ve seen gas and electric increase by about 50% in recent years. Garbage prices have also gone up about 25%. These are all costs that are necessary and typically unnegotiable, so they need to be factored in when considering purchase and in planning your budget. The savviest buyer will expect the seller/realtor to lie about these expenses and with a little added effort can get a clearer expectation by making some phone calls.
If owning property were easy, everyone would be doing it. Rooting your goals and approach in basic principles is a great way to point yourself in the right direction (Think long term!). Clear expectations and understanding of issues that will arise with people, maintenance, and utility costs is a great start. Some people have the patience, the time, the flexibility, and the willpower to tackle these issues on their own and we applaud them and look forward to continuing support by sharing our experiences and best practices. Others may reach the conclusion that with all that is involved, it might just make sense to hire an experienced property manager to fully reduce those headaches.
Mick Lefort is the Vice President of Operations for Nexus Property Management™. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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