Successful investors argue that their preferred strategy works best, but many believe a combination of approaches is the safe and sure way to build a sustainable real estate portfolio. Successful property investors have practices that maximize their ability to obtain properties with the greatest growth potential and strongest return on investment (ROI) highlighted the repeated mistakes that many folks make. Generally, these landlords think that property management is too hard, risky or time-consuming, but with the correct game plan, you can avoid their pitfalls.
Treating property management as a sideline business
Most investors who bought a business worth $500,000 would treat it very seriously and have the resources and systems in place to get the best results. Unfortunately, too many people buy a property and then treat it like a sideline business and don’t achieve its maximum potential.
As in most business ventures, you need to have the right frame of mind if you are going to be successful. The best property managers remain dispassionate about their properties. If you are driving by the property each month to check the landscaping, perhaps you need to deliberately distance yourself from the property.
Creating a friendship with the tenant
Dealing directly with the tenant can be gratifying but in most cases, it simply does not work. A friendly relationship will also make it difficult to make the best business decisions. It is human nature for folks to unintentionally take advantage of people when we know them. For example, a tenant is more likely to pay rent late if they think your good relationship won’t get in the way and you’ll cut them a break.
You would need to be a special kind of person to successfully separate your business relationship from your personal one when serving a notice to quit on a tenant with whom you have a good rapport. The same applies to rent increases, notices of contract breach, and the final security deposit disposition.
Looking at that rental property as your own home
Good investment opportunities can be overlooked because the investor thinks they would not like to live in the property.
Not keeping the property in good condition
One of the things I love most about rental properties is that you can increase the value of your asset by making improvements. In many cases, repairs and improvements can increase the rent proportionally.
In an effort to save money, some landlords will not keep the property in good condition that can be bad if the property does not lease quickly or achieves a lower rent. Repairs, particularly with painting and carpets, should always be done quickly and to a professional standard, even if they are minor.
Failing to increase rents regularly
All rental property owners should regularly review rents to ensure they are at market rates. A small, regular review is much better than a large, infrequent change that shocks the tenant so much they move out. As a new property owner/manager, it might feel daunting to increase the rent for the first time fearing that your tenant may move out. In reality, as long as the increase is reasonable you should have no problems with your tenant. It is much less expensive to incur a minimal increase in rent than it is to make that move.
It is useful to compare your property with others that are similar in the area. Pyramis Company does regular Comparative Market Analyses with its San Antonio property management portfolio
Losing sight of the bigger picture
I find when people buy their first property they get caught up in all the details and sometimes lose focus of the bigger picture of building a portfolio. Set yourself some objectives around your property investing so you can stay on the track to your personal goals. Pyramis Company helps its clients with this on a daily basis.
Using a specialized CPA
It is very important to have a business plan and build a good team of people who can help to make the right decisions. A good CPA that truly understands rental property management is worth their weight in gold. I always encourage people to ask their accountants whether they invest in property and how many properties they have.
It is also important when owning multiple properties to have management software that will keep accurate records, reminders, property upkeep records and rental payment management.
Failing to use an experienced property management company
One of the most important traits of a successful businessperson is the ability to delegate and use the expertise of others. This is true of working with a professional property management company such as Pyramis Company in San Antonio, Texas. Use of a property manager is inexpensive and is also tax deductible. For a couple of dollars a day a property manager can save thousands by ensuring your vacancy rate is low and your property obtains the highest possible rent. They also pay the bills and prepare end of month and financial year accounts so your accountant can prepare your tax return efficiently.
I encourage all rental property owners to use a property manager so their time can be spent finding good property deals. This is particularly true for new investors who can get lots of support from their property management company. Using a management company such as Pyramis Company in San Antonio is particularly important if you are considering renting your property to a friend or family member, although Pyramis strongly discourages this practice.