Robert Kiyosaki likes real estate investing is because real estate touches each part of his financial statement. Starting with his best-selling book Rich Dad Poor Dad and continued in many of his subsequent books, Robert explains how real estate gives cash flow to his income statement and on the expense side of the income statement he's able to deduct the property's depreciation as an expense.
When seen from the balance sheet, he's able to gain appreciation on the asset side and the leverage provided by the bank rounds out the liability side of the balance sheet.
Through a property management company you can also access the four parts of the financial statement. Here's how:
Balance Sheet: Asset Column
Every property producing monthly rent is an asset. It is possible to sell the rights to manage the property to another property manager for a lump sum of money.
Balance Sheet: Liability Column
Robert uses his banker's money aka leverage in order to purchase a large property with only a small percentage as a down payment. When the property goes up in value he is able to keep the entire appreciation amount without having to share it with the bank. He can use leverage and still get the benefit of 100% of the appreciation.
In the property management business, leverage is achieved through controlling the income of a property. A property that is producing $500/month in rent gives a property manager $50 in income. If the manager feels that $500 is too low for the area, then her or she can increase the rents by 10% to $550 and the management company's income will go up 10% accordingly. How many companies can increase their income by 10% without a causing uproar among its clients?
Income Statement: Income Column
As a property management company, you take your 10% management fee directly off the top after the rents have been collected. Here again, if the manager feels that rents are too low, the manager simply raises the rent and increases the income to both the manager and the property owner. It's win-win!
Income Statement: Expense Column
While Robert Kiyosaki is able to depreciate the building as an expense, a property management company cannot take this tax advantage because a property manager doesn't own the building-the owner does, however, a manager is able to make money off the expenses incurred by the owner of the property.
Let's say that a tenant calls to say that the plumbing underneath the sink is leaking. The manager sends out his repairman to fix the leak. The repairman sends a bill to the property management company for the $12.00 plumbing parts plus $30.00 for his hourly rate.
The property manager now marks up the bill by lets say $10.00 and now charges the property owner $12.00 for the parts and $40.00 for the repair time. The $10.00 is for the manager's orchestration of taking the call from the tenant and sending out the repairman.
Now multiply this scenario by the management of 200 properties and you'll find that expense mark-up is a significant source of a manager's income.
As you can see real estate allows an investor to utilize all four parts of a financial statement. As a property manager, you can piggyback on the owner's shoulders and receive some of the same benefits of cash flow and leverage and you can actually profit from the property in ways an investor cannot i.e. expense mark-up.
And here's the best part -and the prime example of a property management's ultimate leverage: the manager isn't responsible to the bank for making the payments on the mortgage. The owner is responsible! The property manager is able to make money off the property without being personally responsible to the bank for the asset that creates all the money in the first place.
Property Management-Real Estate Management - A Booming Career Option
Almost similar to the management function in any other business, property management also implies operation of residential, commercial, or industrial property. In literal words, this may stand as managing a property on behalf of its owner in his/her absence or lack of time. This branch of management includes a wide array of functions related to maintenance of buildings including damage repair, paint, and substitution of any fitting. Property management, also referred to as Real estate Management, at times also involves rent collection, outgoings of payments, insurance payments, paying the maintenance staff, and negotiating with the current and prospective tenants.
Right from the residential apartments to villas, and from small shops to commercial malls, people engaged in the property management service cater to all your property related needs. Not only this, they at times also undertake personal property management, thereby taking care of equipment, tools, and all the related corporeal capital assets attained and employed to build, renovate, and sustain end article deliverables.
Real Estate Management or Property Management actually entails the procedures, organisms, and manpower needed to administer the life sequence of acquired properties. These procedures may include two or more of the following features like acquisition, maintenance, control, liability, operation, and disposition.
Roles of a Property Manager
One of the most important roles of a property manager is to act as a buffer between the landlord and the user of the property. He/she acts as a liaison person who makes both the parties agree on mutually beneficial terms. The property mangers accept the rent on the behalf of the landlord from the tenants and address all the maintenance issues on behalf of tenants. This service thus benefits both the parties equally and is hence flourishing with the upcoming boom in the real estate sector.
Property management service is beneficial either for working professionals who do not have time to search for their desired place or for property owners staying outside Canada. Such landlords definitely need to hire some manager to look after their property and to liaise with their tenant constituency.
This service has many different facets to it. It includes managing the financial transactions of the properties, participation in the litigation process as well as initiation of tenant litigation and signing in of the contracts with maintenance companies, security companies, and insurance companies.
Although litigation is an altogether different stream which is entrusted only upon trained attorneys of the area, yet most of the management services undertake the property litigation themselves. For this, they also at times hire real estate attorneys on an hourly basis who do the freelancing for the former. The majority of legal matters that draw the attention of property managers are cases pertaining to
* Evictions
* Public nuisance
* Non-payment of rent
* Non-payment of bills
* Harassment due to damages and
* Diminution of pre-arranged facilities
Therefore, it becomes quite mandatory for the property managers to be updated on all the law practices applicable under municipal, county, and state law.
In the present scenario, various magazines and journals also publish the desired property details. Such journals tend to publish mainly the following
* Contemporary market trends and research
* Market data digests and reports
* Area-wise deep analysis of property trends
* Various judgments and updates in property law and
* Property reviews based on market research
That is to say, these journals adopt a wide subject abate and address key concerns ranging from the economic, physical, and social aspects of Property management to international perspective.
Thirty Questions to Ask Your Property Manager
Finding a good property manager is like any other vendor search - it's worth your time up front to make the best possible choice. That's because a bad manager can cost you a lot of money, up to the entire value of your rental property investment. Consider:
o Your property manager will be receiving rent and fees on your behalf. A crooked manager could steal you blind.
o Your manager will be in charge of finding new tenants. A naïve or slipshod manager could bring in bad tenants who trash your building.
o Your manager will handle maintenance. A greedy manager could charge a fortune for simple repair jobs.
Here's a thirty-question checklist for interviewing prospective property managers. The answers you get will provide a very solid understanding of each manager's qualifications. You can also get an impression of a prospective manager from other cues - I'll explain those at the end.
Finally, remember that you have to compare managers to others within an area. It's possible that none of the prospective managers in one city will match the high standard of your terrific manager in another. On the other hand, if you can't find a good manager in a city where you plan to invest in real estate, maybe you shouldn't invest there.
The first questions have to do with finding good tenants, which I think is the key to a happy building. A building with good tenants tends to have fewer maintenance and other issues.
o How many vacancies do you have right now? Out of how many total units that you manage?
o What is the average length of time it takes to fill a vacancy?
o Is that average time getting longer or shorter?
o How do you market your rental units?
o Do you require an exclusive arrangement for marketing to new tenants?
o How does your web site look?
o What factors would make you reject a prospect?
o Would you accept a tenant who met your qualifications in some areas, but not others?
o Which qualifications are most important to you?
o What screening methods do you use?
You want a manager who finds good tenants reasonably quickly. He should use a variety of methods to find prospective tenants, such as a web site, Craigslist postings, newspaper ads, signs, flyers and more. Your manager should follow an extensive screening process, but be willing to accept a "maybe" tenant if the situation is right. You want a look at the web site to make sure that is inviting to prospective tenants, and constantly updated.
As for the exclusive arrangement, property managers never mind when you or somebody else finds prospects for them. However, in almost all cases, they will still want a rental fee for moving the prospect into your rental unit. Make sure you have a clause that if the unit hasn't been rented for some time, and you or someone else you find brings in a new tenant, the rental fee is cut in half. You don't want it cut to $0 because the manager will still have to screen prospects.
The next questions relate to tenant management. It's just as important to keep good tenants as it is to find them.
o What does your lease look like?
o What is your late rent policy?
o What other rules do you set for tenants?
o What percentage of tenants do you have to evict?
o How does the eviction process work here?
o How do your tenants contact you?
I recommend sticking with the manager's preferred lease, late rent policy, and rules unless you have a really major objection. If the manager is really experienced, chances are they've developed smart rules and policies over time. Tenants should be able to contact the manager through a variety of ways during the day, and have an emergency number for off hours. If the manager is always evicting tenants, he's bringing in bad tenants.
The next questions relate to maintenance.
o Which kinds of maintenance jobs are handled in-house?
o Which ones do you use an outside handyman for?
o Which ones do you use professional contractors for?
o How many quotes do you get for jobs?
o How expensive does a job have to be for you to contact me before doing it?
o What are your rules for contractors being inside occupied rental units?
o Who are your preferred contractors?
Managers should have a well-thought-out system for assigning jobs to different parties - in-house employees, handyman and professional contractors. Almost any plumbing, heating, or electrical job should be handled by a professional. Other jobs, such as paving a parking lot, require special equipment that usually only professionals have. But most small jobs can be done by handymen who will cost you less.
You want multiple quotes for major jobs - say, anything over $500. You should also have a rule that contractors can never enter an occupied unit -even if the tenant is not home at the time - without a manager's representative being there. Finally, you want the names of preferred contractors so you can run a quick check on them.
The last group of questions relates to experience. You want managers to know the local real estate world inside and out.
o How long have you been a property manager?
o How long have you been a manager in this area?
o Can I see some of the other properties you manage?
o Do you personally invest in real estate in this area?
Finally, you need to understand your arrangement with the property manager.
o What is your fee structure?
o How will I get reports?
o Do you require an exclusive arrangement to broker the property?
o How much notice will you give before terminating a contract?
The manager's fees aren't really important unless they are much higher than everybody else's, or are so high that you really can't afford them. Reports are very important because they are your only window into how your investments are performing. The best way is to get them on your own computer, on your time - as may be the case if they use on-line property management software.
You should not accept any exclusive arrangement to broker properties unless they have a limited term. In other words, if the properties don't sell after a certain time, you can re-list with a different broker for no penalty.
Also, you should require good notice for the contract to be terminated - at least 30 days. That gives you time to find another manager.
Here are some other things to watch out for:
o A manager with a messy office or personal appearance. Chances are he doesn't much care about the condition of the properties either.
o A manager you have a hard time reaching by phone or email. If he won't return your messages now when he's trying to get your business, what are the chances that he'll do better later?
o A manager whom you sense is trying to intimidate you with knowledge. The "don't ask stupid questions, I know all about this" approach is often a cover for not really knowing much at all.
Property Management - Commercial Management
Property management is an ever growing need as more and more people are now opting out of buying homes due to aspects such as the increase in mortgage prices. Renting is now becoming the more popular way of gaining property. It is because of the fact that more of us are now renting property that that need for property management has grown so much. It should be noted that property management requires time, intelligence and good attention to detail as well as management qualifications.
Property management is the job of looking after the properties that people rent out. This is the same for residential and commercial property. Whatever type of property you have as long as you are renting it; you will be able to get the help of property a management team.
Property management companies have the responsibility to deal with multiple responsibilities and aspects of the management and ownership of real estate. The duties of a property management company is to negotiate and stabilise a relationship between the landlord and tenant. The duties performed by a property management company are pretty much the same if your property is a residential or commercial but here we are mainly going to be looking at commercial property. Whether your property is an office block, a retail store or a bar/restaurant the duties that a property management team will perform for you are:
o Collecting rent
o Handle your letting
o Asses potential tenants
o Administration services
o Maintenance of the property
Commercial property management is an essential aspect of the property market if you want to increase the appeal or value of your property. It will allow you to get on with your renting business while the management company gets on with the day-to-day running. The extent of the service that is provided by a property management team is as flexible as you want it to be; it can be used as much as you need it to be.
A professional commercial property management service maintains and raises the level of occupancy, which enables a steady income. This is because a property management company keeps your commercial property in good condition in order to bring in business for the landlord. Your commercial property needs good curb appeal. This is achieved through keeping the structure, landscape and parking elements of the property in a clean and welcoming condition.
Your commercial property needs to be kept in good condition in order to attract customers to use your business. You need to ensure that your property is in good condition to attract businesses to set up shop within your property.
If you have invested within the property market then you will want to ensure that you are getting the most from your investment, which is where commercial property management can help you. By keeping a well run and well maintained property you will generate interest within your business and therefore attract more custom.
If you would like more information about what a commercial property management team could do for you get in touch with an expert company today.
Property Management Fees Explained
When you hire a property management company to serve as the liaison between yourself and your tenants, you want to be sure you're getting the best possible property management services for the money. The services a property management company provides can range from ala carte to an all-in-one inclusive package. Along with that comes an array of fees for each. There is no set in stone fee structure we can provide you. But we can educate you on what common fees to expect and what each is commonly for. In the end it will be up to you to compare company fee structures and choose the best one that fits within your budget. Below are some of the most common fees and what service they provide.
Commission
This is an ongoing monthly fee charged to the owner to compensate the property manager for the responsibilities of overseeing the management of their property. This fee can vary from as little as 3% to over 15% of the monthly gross rent. In place of a percentage some managers may charge a flat monthly amount which again can vary from $50 to over $200 per month. All property management companies generally charge this fee.
Lease-Up or Setup Fee
This fee is charged to the owner to compensate the property manager for their initial time invested and resources used in setting up an owners account; showing property and/or other activities resulting in tenant placement. I guess you could look at it as a "finders fee" for placing a tenant in your property. Once a tenant has been placed and first rent income comes in, the property manager will deduct this fee from the rent proceeds. Some property managers have been known to require this fee upfront prior to tenant procurement. Usually this fee is non-refundable once the property manager has started the process of tenant procurement or any legwork has been initiated with the property. This fee can vary from none to as much as the first months rent, and usually is a one-time fee per tenant.
Lease Renewal Fee
This fee is charged to the owner when a property manager renews a current tenants lease and covers the costs of initiating paperwork or communication involved in implementing the new lease document. A property manager may also justify this fee if they perform a year end inspection of property. This fee can vary from none to $200 or higher, and may be charged every time a lease renewal is implemented.
Advertising Costs
Depending upon the property management company's contract, either they will pay the advertising costs or the owner or they could split the costs. If the manager is willing to cover this cost, most likely they will charge the lease-up or setup fee as outline above. If the management company covers this cost make sure to find out what type advertising or marketing of your property is included. If it's placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. They are many good rental or tenant resource online web sites that bring in qualified tenants for a reasonable fee and you will want to consider these. And don't forget about print media, yard signs, listing on the MLS or even an open house. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising.
Maintenance Mark-up Charges
This is one of those costs you may never really of known about or had it disclosed to you. A "Mark-up" is a charge over and beyond the final bill on maintenance and/or repair work done to your property initiated by your property management company when using their vendors or in-house maintenance staff. This should be disclosed in your Manager/Owner contract which usually will state the markup as a percentage above the final invoice from vendor. For example, your manager had to call a plumber to replace the dishwasher in your rental property. Total charges for completing the job: $400. If your property manager contract states you will incur a 10% markup on all maintenance work the actual cost to you will be $440. Just one of those things to be aware of as these all eat into your profits.
Early Cancellation Fee
The dreaded "3 months and no tenant". Your property manager insist he or she's doing everything they can to find you a tenant. But here it is 3 months and still no tenant; what do you do. Well, look at your Manager/Owner contract and that might be your deciding factor. I am not a fan of this fee, and believe it to be an unnecessary fee and for you manager out there this could be the deal breaker. I'll tell you why; if a property manager is doing their due diligence and keeping the owners in the loop as far as decision making, market conditions and communication lines open an owner will not be second guessing his property managers abilities. The odds of this scenario happening is unlikely but you must be prepared for it. A cancellation fee can range from none to over $500. To be fair, some managers legitimately deserve this fee especially if they have pocketed advertising costs, incurred lots of legwork and time invested in your property.
Commission
This is an ongoing monthly fee charged to the owner to compensate the property manager for the responsibilities of overseeing the management of their property. This fee can vary from as little as 3% to over 15% of the monthly gross rent. In place of a percentage some managers may charge a flat monthly amount which again can vary from $50 to over $200 per month. All property management companies generally charge this fee.
Lease-Up or Setup Fee
This fee is charged to the owner to compensate the property manager for their initial time invested and resources used in setting up an owners account; showing property and/or other activities resulting in tenant placement. I guess you could look at it as a "finders fee" for placing a tenant in your property. Once a tenant has been placed and first rent income comes in, the property manager will deduct this fee from the rent proceeds. Some property managers have been known to require this fee upfront prior to tenant procurement. Usually this fee is non-refundable once the property manager has started the process of tenant procurement or any legwork has been initiated with the property. This fee can vary from none to as much as the first months rent, and usually is a one-time fee per tenant.
Lease Renewal Fee
This fee is charged to the owner when a property manager renews a current tenants lease and covers the costs of initiating paperwork or communication involved in implementing the new lease document. A property manager may also justify this fee if they perform a year end inspection of property. This fee can vary from none to $200 or higher, and may be charged every time a lease renewal is implemented.
Advertising Costs
Depending upon the property management company's contract, either they will pay the advertising costs or the owner or they could split the costs. If the manager is willing to cover this cost, most likely they will charge the lease-up or setup fee as outline above. If the management company covers this cost make sure to find out what type advertising or marketing of your property is included. If it's placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. They are many good rental or tenant resource online web sites that bring in qualified tenants for a reasonable fee and you will want to consider these. And don't forget about print media, yard signs, listing on the MLS or even an open house. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising.
Maintenance Mark-up Charges
This is one of those costs you may never really of known about or had it disclosed to you. A "Mark-up" is a charge over and beyond the final bill on maintenance and/or repair work done to your property initiated by your property management company when using their vendors or in-house maintenance staff. This should be disclosed in your Manager/Owner contract which usually will state the markup as a percentage above the final invoice from vendor. For example, your manager had to call a plumber to replace the dishwasher in your rental property. Total charges for completing the job: $400. If your property manager contract states you will incur a 10% markup on all maintenance work the actual cost to you will be $440. Just one of those things to be aware of as these all eat into your profits.
Early Cancellation Fee
The dreaded "3 months and no tenant". Your property manager insist he or she's doing everything they can to find you a tenant. But here it is 3 months and still no tenant; what do you do. Well, look at your Manager/Owner contract and that might be your deciding factor. I am not a fan of this fee, and believe it to be an unnecessary fee and for you manager out there this could be the deal breaker. I'll tell you why; if a property manager is doing their due diligence and keeping the owners in the loop as far as decision making, market conditions and communication lines open an owner will not be second guessing his property managers abilities. The odds of this scenario happening is unlikely but you must be prepared for it. A cancellation fee can range from none to over $500. To be fair, some managers legitimately deserve this fee especially if they have pocketed advertising costs, incurred lots of legwork and time invested in your property.
Make Finding a Property Management Company Easier on Yourself by Askingthe Right Questions - Part 3
This is part 3 of a 4 part series where we have outlined important questions to ask a property management company before hiring them.
Series 1 Company Credentials
Series 2 Property Management Services
Series 3 Property Management Fees
Series 4 Tenant Screening Process
Rental management companies come in all sizes, capabilities and expertise. Just because one works for one investor does not necessarily mean they will work for you. You need to know some important questions to ask a company during your initial interview process regarding fees they charge for their services. The answers to these questions will give you a good grasp of the total management costs you will incur in exchange for the managing of your rental property. By knowing the answer to these questions before hiring them could prevent future misunderstandings and unforeseen expenses.
Series 3 - Property Management Fees
Unlike a real estate sales commission, there is no standard commission that is charged for rental management services. Usually you will see commissions ranging from 4-15% of the gross monthly rental income. In addition to a commission fee you could be looking at any or all of the following fees:
Lease-up or set-up fee
Lease renewal fee
Advertising fees
Mark up charges on repair work
Early cancellation fee
Service call fees..etc
Do yourself a favor and get familiar with asking the questions below when interviewing a property management company. After you are under contract with a management company is not the time too find out how much your expenses will be. And some of these fees can be negotiated to meet your needs.
Commission
How much do you charge as a monthly commission? Do you charge this if my property is vacant or only when occupied?
Lease-Up or Setup Fee
Do you charge an initial set-up fee, and when do I need to pay this? If I cancel prior to you placing a tenant in my property is this fee refundable?
Lease Renewal Fee
Do you charge me a fee when you renew a tenants annual lease that is soon to expire?
Advertising Costs
Who pays for advertising costs? If the property manager does, ask where they will advertise. If it means placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. There are many good online rental or tenant resources that will bring in qualified tenants for a reasonable fee and you will want to consider these. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising.
Maintenance Mark-up Charges
Do you charge a "mark-up" or percentage over the actual costs of any repair work, service calls etc?
Just one of those things to be aware of, as these all eat into your profits.
Early Cancellation Fee
Is there a cancellation fee if I decide to cancel my contract with your company if after 3 months no tenant?
Note: If the management company has invested advertising dollars and lots of time and effort in searching for a tenant, they may well deserve to be reimbursed for their out-of-pocket expense.
All of the above are the most common fees to be charged for property management services. Asking these questions will make your job a lot easier when it comes down to hiring a company to manage your rental property.
Get Proactive in Property Management!
To be "proactive" means "to be in control of a situation by causing something to happen", whereas being reactive is simply "responding to a situation when it happens". And there is a big difference. Reacting to problems after they have occurred can cause bigger problems and is usually more expensive than being proactive. If you can provide a truly proactive property management service to your owners, there are lots of benefits. You can look forward to delighting your customers and growing your business. In fact your level of proactivity is the difference between you being viewed as a just a true "asset manager" instead of just a "property manager". Which would you rather be?
Here's a story for you
About a year and a half ago, I was re-evaluating my telecommunications options at home. Like most people, I have a home phone line, broadband, a mobile and Pay-TV. I had been with my current provider for as long as I could remember and felt that all the new bundling offers and lower prices had completely passed me by. I hadn't talked to anybody from that company in ages.
I decided it was time for a change and found another provider that had better rates and was able to bundle my services. At the time, I was pretty happy with the process, it was all very simple and convenient and I had saved some money.
The real "magic" came a couple of months later, when I was contacted by a telemarketer from my new provider who announced that the company's broadband rates had recently decreased and "would I like to change to a higher plan that would cost me less?". I responded that I had only been using the service for a short time and didn't think I would be eligible for the plan that he was offering. Happily, though he assured me that I was, and I got an even better service for even less money.
You can imagine my surprise at getting this phone call! What a fantastic example of being proactive! In fact I told everyone I could how amazed and delighted I was with the service. It can definitely pay from a marketing point of view to be more proactive with your existing customers - in a small area or industry, they can be your best source of referrals.
How can you be more proactive?
There are three broad areas where you can work at becoming more proactive with your owners. They are: Profit, Protection, and Communication.
1. Profit.
Investors generally buy property to make a profit, either on rental returns or for a capital gain on it's sale value.
It has been well documented in the news recently that rentals have significantly increased in most states over the past 12 months. Do you review the rent at the end of each lease agreement, to ensure that your landlords are maximising their rental income (proactive), or do you wait for a landlord who has read the news recently to ring you and ask you if a rent increase is possible (reactive)?
Do you make suggestions your landlords about how to improve rental returns on their properties? With a knowledge of the local market, some property managers are also able to suggest improvements to rental properties to ensure that the property attracts good quality tenants and higher rental returns (proactive), versus only fixing things when they occur (reactive). Here's an extra tip... when you do increase their profit make sure they understand what you have done for them and what value you have added.
2. Protection
Owners want to know that their asset is safe. There are many ways which you can assist your owners in protecting their property such as:
(a) Ensuring they take out a landlord insurance policy. Even good tenants can lose their jobs. If a tenant defaults in their rent and has caused damage to a property, they will need this insurance to claim above what the bond value may be. This also protects the landlord from the tenant injuring themselves inside the property. Educate your landlords that they are much better safe than sorry!
(b) Maintaining the property (proactive), rather than making repairs (reactive). A property that is not well maintained may not only lose value, but can also alienate good tenants.
(c) Management of arrears. Do you explain to the tenant before they move into the property your policy on rental arrears (proactive) or do you wait until they are in arrears (reactive) to manage this. Do you have a process which is easily executed - such as a combination of SMS messaging, phone calls and letters (proactive) to be used as early reminders to tenants should they fall behind in their rental payments, or do you create correspondence each time it happens (reactive).
3. Communication
In real estate location, location, location is a common catch phrase. In Property Management it should be communication, communication, communication! Communication to your landlords is so important and the key to being really proactive here is to be able to tailor your communication style to suit the owners needs.
How much do you know about the owner's current personal investment strategy? Are they growing their portfolio? Can you look out for anything that the sales team may have on the books that may suit?
There are so many options for communication in today's age of electronics. Do you know how the owners like to receive communication from you? Do you have email addresses on file for all your owners, and email their statements to them with a newsletter? Have you made use of the availability of online portals, which give them a view of their investment at any time of the day or night?
Even with all the electronic communication methods available today, some owners still like to see their property managers face-to-face. You still need to consider that people buy from people and sometimes the only way to really understand what your owners want is to be able to spend time with them personally.
How can you become more proactive?
Again, three simple principles can help you become more proactive in the services that you provide to your owners.
1. Use Systems
Technology provides us with a great deal these days. The ability to prioritise tasks and keep track of to-do items is a must.
Your property management software should be able to produce certain things automatically. For example, you need to be able to look at your to-do list and determine what are the priority tasks that only you can do, and what are the secondary tasks that you can either delegate or perhaps even outsource. Today, there are many options to use either technology, outsourcing or both, to present a more personal and proactive touch to your owners.
2. Plan Ahead
When choosing property management software, make sure that you are able to have all the information you need about a property, tenant or landlord available at your finger tips, including electronic document storage. You should be able to access all information regarding a property with the click of a mouse. When your owners have questions about their properties, you should be able to answer them instantly rather making them wait for you to "find it in the file".
You should also take advantage of the reporting capabilities of your system. Most systems provide all sorts of statistics that you can access, for example, a report on properties by lease expiry date. This allows you to plan ahead for rental increases or re-lets. Similarly, you should also be able to track insurances, depreciation schedules, inspections to name a few. Your systems and processes together should allow you to plan ahead before problems arise - even if you happen to be managing a large portfolio.
3. Take Action
Nothing happens until someone takes action. Pick up the phone! Call your owners and ask if they would like their statements emailed, or let them know you now have an online portal available to them. Take photos at the next inspection and suggest some improvements. Check their insurance details and the date of their last rent review. Let them know you are serious about proactively managing their asset.
One last word of advice
Earlier, I recounted one of my own happy experiences with a telco provider who appeared to provide extremely proactive service. The happiness I experienced though, was very short lived. Everything that happened after that was awful! They got the billing wrong, responded to my queries when they felt like it, and I never received one of those happy proactive calls. As a result, I changed providers again just this week.
Once you get proactive with your landlords, I can guarantee that that they will love you and want more. But be warned, that this is not something to just "try" it's needs to be a long term commitment. If you can give this, and more importantly sustain it, then your ability to become proactive will become major point of differentiation for your business.
Property Managment Vs Asset Management
One of the biggest mistakes I see apartment and commercial real estate investors make is leaving their investment property in complete control of their property manager. Even the best property management companies will not look at things like the owner.
I have seen this literally cost investors thousands of dollars in lost cash flow and property value, so it is definitely a mistake you want to avoid.
In this article I want to discuss the importance of being an Asset Manager, rather than a Property Manager. First, let's define these two terms:
Asset Manager
Focus is on maximizing return and property value for the investor(s).
Property Manager
Focus is on day-to-day management activities for a property.
"Think Like a CEO..."
If you want to maximize your returns as an investor, you must think like a CEO, and not a property manager. Your focus should be continually on how to maximize the return from a property and increase value.
I see a lot of investors that lose track of this, and leave things up to their property manager, thinking that is their job. It is not.
Here are the things you should be focused on as an Asset Manager:
1) Increasing Income
2) Reducing Expenses
3) Improving Property Value
4) In short, maximizing returns and property value.
Continually ask yourself questions, such as:
- How can we increase rents? Are all of our rents at market levels? Can we charge higher rent for preferred units, such as near a pool?
- Can we reduce our property taxes by protesting the assessed value? Can we reduce our insurance expense by changing companies? How can we reduce every single line item expense - even by a small percentage?
- How can we increase the value of the property? What improvements would maximize value?
None of these activities should be done at the cost of deferring maintenance or reducing the property value over time. As the CEO of your investment you need to see the big picture - whether it is a duplex or several hundred units.
Your property manager, on the other hand should focus on the day-to-day property operations to keep things running smoothly, such as:
1) Property Maintenance
2) Marketing and Rental of Units
3) Collecting Rents and Paying Bills
4) Enforcing Property Rules and Procedures
Good property managers will also perform activities that could be considered asset management, such as performing regular checks to verify market rents are maximized, testing marketing results, and finding ways to reduce expenses.
However, I would caution against leaving everything up to your property manager, because ultimately, it is your responsibility to increase your returns and property value.
By the way, if you liked this article, you will probably like my new report and video series, "The 7 Biggest Mistakes Investors Make When Buying Income Property."
Hire a Property Manager and Save Time, Money and Frustration!
In this post, I am going to explain to you how hiring a property management can help to save the owner more than just the price of the management fee. Let's say we have a home that rents for $1600/month. As a real estate management organization our average fee locally is 6-10%. Therefore, let's use 8% of $1600 which is $128/month. For an example our company only charges a flat fee of $75 a month for monthly management, however I'll show you the way a property manager can help to save above $1200/year by using a professional in the business.
Five Concrete Ways in which a Property Management Company Can Save Time and Money for an Owner
1. The very first way a management company can save you money is by maximizing rents. These management companies comprehend rental prices and what a tenant would most likely like to pay for a particular unit in a certain area. Property managers in addition have a footing on advertising and featuring. They know all the suitable areas to market and are available promptly to show properties to have them rented for the best conceivable price. On average a property management provider can help to save at the very least $50/month over 12 months which is already $600
2. The next method that can help you save money is by means of reducing vacancies. Your average owner will take approximately sixty days to fill a vacancy with respect to the current market not surprisingly. Utilizing a property management company, they average under 1 month. All over again, with an ordinary lease of $1500, the specialist will save you over 12 months $1600 because of this one area.
3. The 3 rd area a management company can save you money is by marketing. Real estate managers possess lower prices through internet sites and newspapers. They usually can save no less than $150 during marketing and advertising through 1 year as opposed to an individual owner.
4. Your fourth place to save you money is usually as a result of maintenance and repairs. The majority of property management organizations get access to vendors at lower rates. Our organization helps you to save approximately 30% the normal cost for an individual owner. For a typical single family house the cost of maintenance as well as repairs over one year averages around $250-$400 depending on the residence. Some of our more recent properties never have any maintenance in the course of the year, a few of older properties can have more issues throughout the year. Along with a 30% savings this saves the owner $75 to $150 over 1 year. *Our partnership with the regional title company has allowed us to provide our owners with discounted home warranties as well for older houses with estimated approaching repairs.
5. The fifth method is through selecting a very good qualified tenant through our screening process techniques. Many property management organizations have fewer than a 1% eviction rate as a result of in depth verification measures that they already have executed. The "bad apples" realize that they can't successfully pass a management company's screening process so they will rent through the individual owners and sell them regarding how excellent of a tenant they are going to be even though they don't have credit history, or no leasing references, as well as no Id, or even a large amount of additional reasons they use. This on its own helps you to save the owner the price of eviction which within our region averages around $1,000, the price of loss rent of about 1 month of $1,600, plus the expense of repairs of approximately $1,500. This thorough screening practice on its own can help to save the owner $4,000!
The majority of owners mainly think about the management fee that they're losing but not concerning these 5 areas which a management company can help to conserve them money. Along with these typical estimates above, a professional management company can help to save the owner more than $6,000 in a year.
Vienna Property Management, Rocklin Property Management in Rocklin CA specializes in Single Family and Multi Family residential real estate management. Scott Schuhwerk of Vienna Property Management has vast experience in professional residential property management and tenant placement.
The Basics of Property Management
Purchasing properties for the purpose of renting them out has become a good source of income for some individuals. This article takes a look at the basics of rental management for those who are interested in entering this venture.
What is property management?
Property or rental management, as the name suggests, is the process of taking charge of real estate, be it for residential, commercial, or industrial purposes.
Managers are either the owners of the properties being offered for rental or third-party individuals who are tasked with overseeing the care and maintenance of the rental properties in behalf of the owners.
What do property managers do?
Property and rental managers are given several tasks, which can include:
• Maintenance of the property. No tenant will want to stay at a ramshackle residence or place, so it is the manager's responsibility to make sure that the properties that are being offered for rental are well-maintained.
• Getting tenants. One of the main responsibilities of property or rental managers is to make sure that the rental properties are occupied by tenants, which is why they are also responsible for finding good tenants who will not only occupy these properties, but take care of these well.
• Collecting rent. Not only do managers need to make sure that the right amount of rental fees are being paid by the tenants, they will also need to ensure that they are paying these regularly. Property managers should always be on the lookout for tenants who make delayed payments.
• Handling any issues that may be experienced by the tenants about the property. There are several issues that may be experienced by tenants during the course of their lease, such as busted pipes, peeling paint, and other such maintenance problems. The manager is responsible for seeing that these issues are resolved quickly and effectively.
Is it better to do property management yourself or hire someone to manage the property for you?
It depends on where you are, since there are some states that have imposed regulations on who can work as property managers. In most states, only those who are licensed real estate brokers can work as property managers. Alternatively, those who aren't real estate brokers can work under these professionals in order to continue practicing.
Practicality-wise, it's better for those who already have experience in management of property to maintain the property and take care of all of the necessary tasks in managing it instead of someone who doesn't have that much knowledge in it. This is because someone who has already managed properties in the past will already know what possible issues or problems may be experienced by the tenants, and will thus be able to come up with remedies to fix these.
Property management can be very profitable, but this isn't necessarily the best career path for you. If you're interested in entering this industry, be sure to check what your options are and do some research about this so you can better prepare yourself for the work awaiting you.
Subscribe to:
Posts (Atom)