HOW IT WORKS
Residential property management is an underutilized service with a long history of success. On the commercial side, it’s easy to picture the owner of a strip mall or commercial plaza hiring someone to maintain and care for a property that houses numerous independent stores. But all too often those interested in real estate and real estate investment fail to make the jump to how this same model can benefit residential property owners as well. Although the residences you own, or potentially own, don’t all share a common address or parking lot, the scalability of consolidated management expands your own potential for ownership exponentially. In short, hiring a reputable property manager for your residential properties will ultimately allow you to operate on any scale you choose. You might not think of the three family apartment building you own as being in any way similar to the restaurant or liquor store anchoring your local plaza, but you can and you should. Having a better understanding of how property management works will help create that vision.
PROPERTY MANAGEMENT: THE BASICS
Most property management companies that offer residential services, will offer services under a couple different departments. All will have a leasing branch that takes care of advertising vacant units, tenant screening, tenant placement, lease creation, and rent collection at the very least. If the company is efficient, which you need them to be if you want to get the most bang for your buck, they’ll also have a separate management branch.
[ Learn More: HOW TO HANDLE TENANTS WHO VIOLATE THEIR LEASE AGREEMENTS ]
The management branch will cater to communication with owners and tenants, financials, the eviction process, and other legal issues (i.e. a tenant dying; illegal drug use). If a property manager has their leasing team handling these things or doesn’t separate the two at all, which is very common, it’s a clear indicator that they’re not fully invested in either area. They can do better…and so can you.
[ Learn More: ORGANIZATION AND BOOKKEEPING: THE SECRETS TO INVESTMENT SUCCESS ]
Finally, a property manager that is going to help you maximize your profits and help grow your portfolio is going to need to have an in-house maintenance department. If they offer to hire third party vendors, it’s much more convenient than you having to do that yourself, but it’s also an area where you’re paying far more than you need to and far more than you would with a company that has their own maintenance team.
[ Learn More: Zoom Out: More On The Basics of Residential Property Management ]
PROPERTY MANAGEMENT: THE TYPICAL PROCESS
You’ve bought a new property (or maybe you’ve inherited it). If you have a typical home and you want to rent it out, we’d advise that you try to do so on your own, without the help of a property manager. There’s just not enough room there in terms of profit potential or variables for paying a professional to make sense. Most of our clients own a traditional three-unit apartment building, so we’ll use that as the basis for this conversation. Now that you have your property, you do your homework and find the best property management company in your area. Once you’ve made that decision and brought a professional on board, here’s what you can expect:
- Assistance in filling any vacant units:
- Typically they’ll advise in terms of maintenance work that might be needed to get the most value out of the rented unit.
- Advice on expected rent amount given the unit and location.
- They’ll then advertise, screen, and present tenant information for your approval so the vacancy can be filled.
[ Learn More: HOW MUCH CAN I CHARGE FOR RENT? ]
- Convenient online payments:
- You’ve hired someone, so you don’t have to worry about rent collection. If your manager doesn’t offer and push tenants toward online payments, you’ve hired the wrong company. Cash is antiquated and risky for many reasons!
- You’ll be provided consistent communication about when rent is paid and any outstanding balances.
- Your property manager will also communicate regarding the eviction process (if necessary).
[ Learn More: TOP RENT COLLECTION MISTAKES MADE BY LANDLORDS ]
- Maintenance Work Orders (for your approval):
- The most challenging part of managing property is keeping up with maintenance needs…that’s a huge reason why you hire someone else!
- Tenants will request maintenance via an online portal that both you and your manager can see. Unless the maintenance need is an emergency, it will require your OK before any work is done.
- You’ll receive updates once work is finished…this will include costs, which ideally will just be taken out of the rent collected before that money is transferred over to you.
[ Learn More: HOW BEST TO PLAN FOR NECESSARY MAINTENANCE EXPENSES ]
YOUR ROLE AS THE OWNER
As the owner, it is your job to be an active participant but at all costs avoid micromanagement. You’ve hired a professional and you want to be there when they need you to take action (i.e. approve maintenance work orders, respond to questions they or the tenants have). You’ve set the plane on autopilot, but you’re still seated in the cockpit.
[ Learn More: 4 TYPES OF PROPERTY OWNERS: WHICH ONE ARE YOU? ]
Property ownership is considered recession-proof because demand will always be high. Getting involved in real estate investment is a great way to build wealth for your family with greater control than you’d get from a typical retirement account.
If you are an active participant and you’ve hired a strong property manager, your returns will likely be very strong. Of course the market is always a variable, but a good property manager will help you successfully maintain the value of your property while also collecting income along the way. Throughout this process, you will build equity as tenants pay for your expenses, including your mortgage. You will not find returns like this anywhere else!
A great property manager will do all of the above, but also help you add to your assets. They’ll help you not just maintain the value of your property, but add value to it. They’ll see and help you see that every obstacle is an opportunity to increase value and quality of life for your tenants. A great property management company will have a system to help you increase your portfolio. At Nexus, our Nvest® buyers’ agency program has helped countless clients move from owning just one building with three units to owning multiple buildings and double digit units. We all have the shared goal of making real estate investment a more common means to financial flexibility and success. Do your part by finding a strong property manager in your area that is not just good but great. Help us redefine property management and real estate investment as a whole by helping yourself.
CONTACT NEXUS PROPERTY MANAGEMENT
As always, reach out to our team if you have any questions or want to learn more. Our teams offer industry leading commercial and residential property management throughout Southern and Central New England. Nexus also offers franchise opportunities nationwide.
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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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