Updated: Sep 15
Management is one of the most important aspects of a successful real estate investment. This is just as true for a single-family home as a 200+ unit apartment complex. Proper management can truly be the difference between a successful and an unsuccessful investment experience.
Many investors ask the question: “Should I hire a property manager or manage my property myself?”
At the end of the day, almost anyone, especially if they own a home, can check the boxes required for the day-to-day operations of a small (1-4 unit) rental property. That said, just because you know how to repair a toilet and sign a lease, doesn’t mean it is the best choice for your investment situation.
Are you sure the plumber is charging you a fair price? Did you properly screen the tenant to ensure you don’t end up evicting them six months into a 12-month lease? Does your lease include enforceable provisions to ensure tenants respect and care for your property?
In reality, the question boils down to: “Will self-management bring me the highest possible long-term return on my investment” and “Is self-managing the best possible use of my time?”
Many investors focus on cash flow as the primary indicator of investment performance, and for good reason. Cash flow is the lifeblood of any investment or business venture.
That said, short term cash flow increases brought about by overzealously slashing expenses can cost you big time in the long run. Yes, it may be tempting to skip the HVAC service this year to put some additional money in your pocket, but what if that causes your system to prematurely wear out and costs you thousands of dollars in repairs next summer (not to mention an unhappy tenant waiting for a repairman in the heat)?
Yes, cash flow is critically important, but even more important is the long-term performance of your investment. Along with cash flow, other factors like vacancy, capital expenditures and appreciation (among many others) influence the long-term returns of your investment. Properly maintaining a property will have a positive impact on all of these factors.
Tenants tend to stick around longer in a well-maintained unit, and if they have a sense of ownership, they will tend to take better care of it themselves (saving you on vacancy). Performing proper preventative maintenance on your property and its systems will save you in the long run on capital expenditures (replacing appliances, HVAC, etc.). And a well-maintained property with documented investment performance data will generally sell for a higher price and in a shorter time frame when you go to liquidate (maximizing appreciation).
While return on investment is their primary motivator for investing in real estate, most real estate investors have full-time jobs and family commitments, or they would like to spend more time focusing on growing their investment portfolio. If any of these describe your situation, then professional management is right for you.
The right manager will free up your time to focus on the things that are truly important. The right manager will have the experience and systems in place to ensure your investment is protected and your long-term returns are maximized.
Remember: your time is valuable. If you own rental property in the Baton Rouge area, be sure to check out Cornerstone Management Group. They offer a full suite of property management services to take the hassle out of owning rental properties.
Until next time, if you need any help finding or selling a home or investment property, reach out to Sally or check our SoldWithSalBR on Facebook. As always, if you have any questions relating to real estate, remodeling, Baton Rouge or life in general, drop us a line at firstname.lastname@example.org.