Is The Property Management Business For You? Mini Guide For Real EstateInvestors - Part 1

This mini guide for real estate investors is written to help entrepreneurs like you with the mystery of property management career. The investment risks are higher when decisions are made without enough information. By now you know that you want to invest profitably in real estate or already started the process. All the motivation is coming from your desire for financial independence. I know that, because I am with you right on the very same goal.

Assume you have just purchased your investment property. It does not matter whether it is a 10--unit apartment building, a small office building or a single--family home. It is an attractive rental property and you are asking a fair market value rent.

You should have no problem attracting tenants and maintaining a high level of occupancy. What happens with the tenants once they move in is going to depend on you.

The problems with property management are not caused by the business itself, as much as by a lack of education. The property management is the most misunderstood parts of real estate investing. If you do not have good property management, then you will have high management costs, bad tenant relationships, high vacancies and that will be the end of your business.

You would consider these ideas in making your managing investment decision; I did it when I started:

1. The money you save, by doing property management, may mean the difference between a positive or a negative cash flow for your rental business.


2. Managing your own properties, at least in the beginning and learning the management business is something to consider. After you become familiar with the manager responsibilities and acquire more properties, you will be able to do a better job of managing professional managers.


3. More management and investment resources are available at my website.

How I start my property management? I went to school to gain my knowledge before facing the real life competition. I start my property management from the bottom up. My previous experience with real estate renting was being a good tenant for about five years in two different places.

Eight years ago I passed the real estate agent state examination and I worked for two brokers and managed properties on the side to build experience. I got my associate broker license in real estate about four years ago.

We resettled in the U. S. A. coming from communist collapsing East Europe, in 1990. Our assets at that time were intangible, mechanical engineering education and big hopes.

We did not have this game of "getting rich with properties" in the socialist economies. Actually, it was forbidden to even think about owning properties. It took me five years to comprehend there is a less risky way of investing by using real estate properties and rentals.

For $50 and about one hour conversation with our previous property manager -- a very nice lady -- I was in business. The management forms I received helped me to build my forms and gave me enough confidence before the closing on my first apartment building. I was on my way, investing in real estate and managing my own properties for profit. This is how I started my property management career. Now, I appreciate a property management career or a job in property management a lot more.

I am not preaching here to manage your rentals yourself forever. For us, property management is part of getting the necessary life experience to succeed in this new country.

Dealing with people and their needs gets messy if you do not use a system. Qualifying the potential applicant over the telephone saves time and money. Renting real estate is the toughest part of the property management job. Here is how my qualifying filter system is working:

The local newspaper classified ads bring most of my renting real estate applicants. I call them Potential Applicants (PA) before submitting the rental application. I give to potential applicants enough info in the newspaper, so they may drive by and talk with our tenants. The prospect applicant should come ready, wanting to rent the apartments from us, because we take good care of the tenants and the apartments.

This is what I want with my ads.

"My town, clean 1 bedroom apt. $500 plus deposit, utilities included, A/C, coin laundry available, 123 Main Street, (222) 333-4444"

They have the address for the location, that the utilities are free and my cell phone number. Here are examples of first conversations over the phone with the potential applicants (PA).

PA: Hello, is the apartment available? Me: Yes, when you want to move in? My name is Ernest. PA: Thanks, my name is Mary. It is for my son John; He is planning to move soon. Me: Sorry, is it a strong reason way your son can't call himself?

(My experience tells me I may stop here and deal with the real party later, the relatives or friends have a different agenda sometime. In reality, I continue giving information about renting.)

The son is calling me later.

PA: Where is this apartment located?

Me: At the corner of Main and Grand, next to the gas station, across the Seven Eleven. Look for apartment no.30. You can drive by and get from "Take One" box, an application with info printed the other side. PA: Do you accept pets?

Me: What do you have in mind as pet? (Reptiles, rodents, dangerous dogs, etc are not on my list, I ask because the applicant will talk and I can mind his/her personality).

PA: It was my aunt' cat and she is 10 years old, etc. Me: Yes, we accept a qualified cat with a "Pet agreement". The no refundable fee is $175. Do you have some pay stubs from your job? That will help us to check your employment; or

PA: No, I receive social security checks, I am on disability.

(To assume when renting real estate that all tenants on assistance or seniors will be bad is wrong. Some may get a co-signer.)

Me: Sorry we only take applications if the total monthly documented net income is 3 times the rent. The no refundable application fee is only $20 and we do a credit report request and pay a different company for that service. (Some applicants just gives up after this phrase.); or

PA: Yes I work two jobs: manager at Mac Donald and telephone marketing at night. My girlfriend is working as telephone marketer. Together we make $1400 a month.

(This is a border line situation, they may pay for a few months and something is happening and girl/boy friend is gone. He/she no longer qualifies by income requirements. In this cases if the vacancy is hurting me and I cannot wait for a better applicant, I might take them, but the lease will have a clause: "If he or she intends to leave any time, they both must leave at the same time"); or:

PA: Yes, I work part-time at "Printing Nice" and I am full-time student. It is my fist time out of home; my mom may co-sign the lease.

Me: OK, bring your mom when you want to see the apartment.

PA: We want to see it, Saturday morning at 12 noon, it is our time to look for apartments.(PA may put some pressure on you)

Me: OK, see you then, at apartment no.30 second floor, a sign "For Rent" is in the window/door.

The potential applicant interview is very important. You have to see face to face the potential applicant and their pet. Watch their car how clean is outside and inside and get an idea about how much that person care about personal staff.

My "good tenant" definition is: A good tenant is paying always on time, takes care of apartment, is friendly and comprehends "quiet enjoyment" words.

It is better for me to wait for the right applicant and do not rush to make a buck. Also, I discovered that the service to society, the humanity we share is coming after you take care of our business. Otherwise you will not be in this business for very long time.

Anatomy of a Financial Statement - Property Management

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.

Is Starting a Property Management Company Right For You?

This article discusses whether starting and developing a Property Management Company could be for you or not. There are some personalities that this business is suited for, and equally some that are not. I will discuss each characteristic that lends itself well towards being a Manager, and more importantly doing it as an Entrepreneur. Below are the Top5 characteristics that will help you become a successful Property Management Business Owner:

1. Attention to Financial Detail. This characteristic is perhaps the most important detail for this business. Managing properties, especially once you start growing and increasing the number of properties that you manage, requires the ability to keep track of every penny. And believe me, as you grow, there will be a lot of them.

Think about it, if you have 50 properties averaging $1,000 per month in rent, you are then collecting $50,000 every month to deposit into bank accounts. Then from that $50,000, you are paying some utilities, mortgages, then disburse the remainder to the owner, etc. Now, I haven't even mentioned that 10% of the rents you have to collect will not pay on time. So you have to be very good at keeping records of those monies received and not received as you progress through the monthly rental cycle, not to mention applying the appropriate late charge to the specific account. As you can see, having a background in financials or accounting can go a long way in property management. And don't let this article scare you, just consider this more of an awareness of the field.And don't worry, it can be learned the hard knocks way, we did.

Once a month you will be required to reconcile your bank account statements to your accounting programs. If you are off even 1 penny, that is a problem. You will need to find all errors and maintain your books on track 100%. Many states actually regulate this activity with random inspections.

2. Excellent Communicator. This characteristic is just as important because Property Owners rely on you to communicate to them the status of their property more than just receiving a monthly property operating statement. They should be contacted by you personally at least once a month to let them know, at a minimum, that everything is going well with the property. Also, keeping in good contact with them allows you to further develop your relationship with them. Because if you don't, your competitor will.

This business deals with many time sensitive matters. If you are someone who procrastinates on getting back to people, then you will make enemies fast. Property Owners want to be heard back from you relatively quickly. In fact, this is the number 1 reason why we have picked up a lot of business. Larger companies allow their Managers to take on far too many properties than they should and they become bogged down and are not able to give the personalized service to Property Owners that they deserve. Tenants also, need to have a certain level of customer service in getting maintenance items repaired, etc. A good Property Manager will promptly return phone calls and emails.

3. Are you a people person? Kind of a vague question, but the bottom line is that you will be around all kinds of people 24/7. You will challenged with domestic problems, money problems, families that just had a baby and now cannot afford the rent. There will be a new challenge almost every day. Are you the type of person that can take on these issues and help solve them without getting too involved. Can you, at the same time, be able to file an eviction on that new family? This is a 'for profit' business and you cannot be in the business of charity. I know that seems harsh, but it is the reality of the property management business.

Lastly in the people person section, you will be making "sales calls" on Property Owners. And as such, you will need to be able to modify your personality to fit that of your Prospective Property Owner.Many people are good at being a Property Manager, but they are not so good at the people and sales skills and as such have a hard time getting business. However, let me say too that sales in this industry is a learned skill, it does not come natural.

Building and fostering long term relationships are very important in this business. You will be taking care of properties for your Owners for hopefully years and years. This is not like being a Realtor in that you will work with people for a couple months and move on. You will need to work on earning trust in your Customers and continuing to build on that relationship over time.

4. Are you a problem solver? As a Property Manager, all you have is problems. Tenants call you for one reason and one reason only: they have a problem. Either the window is jammed, or the neighbor is bothering them, or they can't pay rent. Either way, you will be plagued with problems. You will need to be someone who handles these "problems" as opportunities and deals well this type of stress.

Additionally, as you build your number of properties, you will need to be an excellent multi-tasker. More properties equals more Tenants which equals more phone calls. However it also equals more money, so bear that in mind as well! When you get big enough you can then look to delegate these responsibilities, but starting out many times it is a one person show.

5. Are you OK with paperwork...and lots of it?The first of the month is a very busy time for Property Managers, this is when you are collecting rent monies and disbursing funds. Also, you are creating monthly reports and sending them out to the owners. On top of that and throughout the month, you will have discussions with Tenants that will need to be documented. Discussions that relate to tenancy, following up on a request you made to them, or financial matters will need to be documented to properly protect yourself and the Owner. If you are not good at follow up with your communications, you could lose that conversation and if the Tenant took you or your Property Owner to court, since you didn't properly document the conversation, you could lose. The courts always favor Tenants when the Landlord or Property Manager don't follow the laws (or appear to not follow the laws because of lack of documentation). Documentation and administration is again a critical part of the communication aspect and can sink your ship if not percormed correctly.

There is one more characteristic that is paramount in any business, not just Property Management. That is being very positive and not listening to the nay-sayers. Other people will always try to burst your bubble. You will have plenty of days when it doesn't seem like building your own business is even possible. Persistence is the key to any business, and it can only happen when you are positive.

In summary, I wanted to highlight those characteristics that could become a challenge in becoming a Property Manager. If you see some of these qualities as being a challenge with you, it doesn't mean you couldn't become a Property Manager, it just means that you have an opportunity for improvement. Property Management definitely is not for everyone, is it for you?

Significance of a Property Management Business

Property management is typically a cumbersome task that can not only eat away a major portion of your precious time, but can also burn a big hole in your pocket. By hiring a good Westminster (and surrounds) property management firm, you can protect yourself from all the intricate hassles that are associated with real- estate management. Additionally, you can also increase the value of your investment. Here are 7 more reasons to engage a reputed property management company.

1. Do you have time to manage your property?
   To prolong the life of your acreage, you would have to regularly inspect it to find out the areas that need repair, and thereafter, you would have to initiate and supervise the rehabilitation work. If your property is closer to your residence, then, to an extent, regular visits can be managed. However, if you live far away, then you'll be tempted to keep your eyes closed due to shortage of time, and negligence can be a recipe for disaster. A good Westminster (and surrounds) property management firm can proficiently deal with all the upheavals without your assistance.


2. Do you know how to cope up with tenant problems?
   No matter how tolerant you are, tenant problems can easily cause you unnecessary stress. Experienced property managers knows how to deal with irrational tenant activities such as:




• Prepare the property for the next tenant


• Find out what is the best rent rate for your estate


• Market your property extensively




3. Are you well-acquainted with the procedure of evicting and finding tenants?
   Tenant eviction is a complicated process, which should be handled delicately. If done incorrectly, you can find yourself in the centre of a ghastly legal muddle. A first-rate property management company has in-depth knowledge of rules and regulations pertaining to tenant eviction, and for this reason, it can carry out the process smoothly without any legal hassles. The process of finding new renters is equally complex. A superlative property management firm has the expertise to examine and evaluate thousands of applications within a short span of time. The flawless screening process helps in the selection of a tenant who would use your property appropriately and pay the rent on time.


4. How much experience do you have with property renovation and rehabilitation?
   Prior to the arrival of the new renter, you have to ensure that all the broken items have been replaced, cracks and crevices have been repaired, and floors and walls are dirt-free. All these deeds are not only time-consuming, but also expensive. By engaging trustworthy property management firm, you can take the burden of house maintenance from your shoulders. The company has in-house maintenance staff who have extensive information about the latest building techniques and construction materials. In addition to this, the firm also has access to a network of independent contractors who readily provide top-class services at an affordable price.


5. Are you willing to be available 24-hours a day and 7-days a week?
   With a dependable property management firm for your Westminster (or surrounds) property on your side, you can lead a stress- free life. The company will represent you 24-hours a day and 7 days a week. Apart from handling day-to-day work, it will also competently tackle emergencies that usually arise in the middle of the night.


6. Do you have thorough understanding of property laws?
   As the owner of the estate, you are expected to abide by the property laws stringently. However, if you're not familiar with the law, you are bound to get trapped in one of the many loopholes. A property management company, on the one hand, can protect you from lawsuits, and on the other hand, it can ensure that all the rental and lease agreements are up-to- date.


7. Do you have the capability to handle all the financial aspects of your property?
   From tax to insurance, a good property management company can handle all the financial aspects pertaining to your real estate dexterously.

The Benefits Of Property Management

Countless landlords elect to manage investment properties by themselves but occasionally landlords require more assistance, and that's where a property management business will make sense.

Management companies work directly with potential and existing tenants, helping you save time along with marketing and advertising your current rentals, collecting rent payments, dealing with routine maintenance and repair problems, answering the different renter issues, and in many cases seeking evictions. A property management service can help you stay away from the headaches of being the property manager and concentrate on experiencing and enjoying the rewards.

Why you need to retain the services of a management company?

A management firm will primarily be dealing with the maintenance of your investment property or home. Just about all properties need routine maintenance however if you have a paying tenant you are required to solve maintenance problems immediately. Normal property maintenance helps keep the value of your investment property up and in many instances keep your property safer. This can really help you save cash over time since it will increase the life of your investment property.

Based on the age of a home you will probably discover more problems. For this reason it is very important your property is carefully examined prior to tenants moving in. Any issues that are found will be fixed in hopes to reduce the amount of problems and complaints which will arise once the property or home has been leased out.

There are many types of property maintenance which will need to be examined and this maintenance vary from becoming major issues like roofing repairs to small jobs like interior painting, carpentry work along with yard projects.

When should you employ any management company?

*You do not live close to your rental property.

If the rental home is located far from where you live, working with a property management company may be important in working with the many challenges that you won't be able to manage from very far away.

*You just are not serious about hands-on management.

A number of property owners enjoy the challenge of locating good renters and the advantages of having a secure and desirable property or home on their own. However, if you look at rental property ownership purely being an investment and desire little or nothing regarding the day-to-day managing of the properties, think about employing assistance to manage your property.

*Your time and energy is limited.

Even though you appreciate hands-on management, you might not have enough time to be able to spend on your business, particularly if land-lording is not your day job.

Getting a property management company is definitely an appealing option if you're able to afford the service fees. Many companies charges you a percentage of the rent or lease, while various other property management companies charges you a flat rate fee.

Should you decide to retain the services of a property management firm, be careful in choosing one and ask questions to evaluate the services provided.

7 Things to Consider When Choosing a Property Manager

Buying a property is not as difficult as taking care of it. In addition to dealing with the complicated real-estate laws, you have to efficiently sort out the problems that your tenant puts forth. At the same time, you also have to make sure that your investment is safe and secure. It is not easy to fit in all these tasks in a schedule that is already busy. Our Yokine property management business will not only help you to manage your property adeptly, but it will also ensure that you reap rich dividends year after year. Here are 7 things you should take into consideration when choosing a property manager for your investment:

1. Company experience - Property management is certainly not an easy task. It involves a lot of intricacies, hassles, complexities and challenges. To be able to handle all the problems proficiently, extensive experience in managing various kinds of properties is essential. A good property management business is one that has experience in handling old as well as new commercial, industrial and residential properties. Go through the company profile carefully; it will help you to ascertain its level of experience.


2. Employee competence - Verify whether the employees of the company are competent, hard- working and honest. Never take such claims as 'combined experience of 50 years' seriously because it is unusually difficult to ascertain whether one employee has 50 years of experience or 50 employees have 1 year of experience each. The representative of the company should be able to look after your property professionally. Apart from routine responsibilities, he should be able to handle emergencies and disasters competently. Testimonials and references are a good way to adjudge employee competency.


3. Property insurance - A wide variety of property insurance plans is available, and in such a scenario, it is often difficult to determine which one is the best. The professionals of a reputed property management business can help you to buy a superlative insurance policy. Additionally, by pooling together properties of several owners, they can facilitate lowering of insurance rates, which enables you to make a significant saving. Request the company representative to provide you with details of the most feasible property insurance plans.


4. Taxes and other financial obligations - The property management company should readily handle all the formalities related to the submission of property tax. The firm should also have a tax consultant to supervise appeals against appraisals on your property. From time to time, the company should also provide you a Profit and Loss Statement and Balance Sheet. These financial statements will help you to determine whether your property is in a profitable proposition or not.


5. Rental and lease formalities - If you're intending to rent your property, then you should ensure that the company has the expertise to handle all the lease and rental formalities. From finding a good tenant and chalking out the lease agreement to collecting rent and dealing with repairs and overall maintenance, the property management firm should be able to carry out all the tasks deftly.


6. Property development and management - A professional property management company will sincerely take charge of renovation and rehabilitation work of your estate. If you plan to develop your property, then make sure that the concerned supervisor has in-depth knowledge of the latest building techniques and construction materials.


7. Fees and charges - A first-class property management company will provide you a clear- cut fee structure based on the type of property you possess and the kind of services you wish to obtain. Before selecting the company, make sure that the taxes and labor charges are clearly defined and that the fee structure is competitive.

Choosing a real estate agent for your property sale or management is a difficult task. Holdsworth Real Estate is a professional real estate agency specializing in Yokine property management. They ensure customer the smooth selling, buying and management of your property.