The residential housing market has created some excellent opportunities for new investors to acquire multiple properties while they are relatively cheap. With their new commitment to the banks which back them, however, new investors in the residential real estate market are being introduced to a new pressure: how to fill their properties and manage them profitably.
Talented individual investors know their strengths, and they usually discover their weaknesses through trial and error. This can be expensive.
An investor can read all the signs that tell them when it is time to buy. A good one can also identify the time to sell. However, the time gap between buying and selling can be extended for several years, calling upon the investor, perhaps, to be something he is not: a property manager.
Finding tenants to rent properties may seem easy. It seems reasonable to the new investor that with so many people losing their homes in the past three years, there would be a glut of new renters in the market. The timing would seem ideal.
The key, however, to making money with residential real estate is finding the best tenants, holding onto them for the long term, and taking care of the property so that it remains attractive enough to new residents who are seeking a home.
Managing properties profitably requires experience in the business of screening applicants, avoiding costly litigation with tenants, building resources to take care of emergencies and everyday needs, and a good understanding of how to achieve a favorable profit-loss balance.
Investors find the option that leaves them with the most freedom, and the least frustration, is to find a property management company that shares their ultimate goal of making a profit.
One of the most salient benefits of contracting the services of a property management company is weeding out the risks associated with someone living in the home that has a history of walking out on lease contracts or leaving homes in poor condition. The litigation expenses alone, in cases like these, can erase any profitability.
By screening tenants, property managers are the first line of defense against property loss and expensive attorneys.
As the investor’s risks increase with multiple properties on the line, management companies become the owner’s watchdog, keeping an eye on the property, the tenants, and the long term growth of capital for the new real estate investor.