Being a landlord can be a passive venture while you navigate your investments in real-estate, or you can take a hands on approach to the industry. If you were to take the hands on approach, this would mean you would take an active role in the management and maintenance of your properties. This approach can have its advantages, such as having a “boots on the ground” perspective to how your properties are being managed. While that kind of control might seem desirable, it may not be your best course of action. It may actually work to your benefit to take a back seat on the scene and let someone else handle that for you.
When You Should Not Manage Your Own Properties and Take the Back Seat
Not only can it be beneficial for landlords to take a backseat to the management of their properties, it may, in fact, be their only option. A landlord with large or multiple properties would need help managing them. Trying to manage the various aspects of owning rental properties can become overwhelming even with additional oversight. Landlords who invest in extra help can tackle their properties needs from multiple fronts which, in turn, results in a more efficient operation and a higher return on investment. Landlords who recruit extra help can include an apartment complex owner, college student housing unit, and those who may own properties that are not geographically near each other. Speaking of geographical barriers, a landlord might not live near their properties in order to properly manage them.
Landlords often may own properties in other states or in regions that have high desirable traffic like coastal and beach properties. Even landlords who might not have numerous properties might need to lend management to someone more capable. Many property owners also have other jobs or occupations, and their properties are intended to be a passive source of income. Moreover, a property owner may need a day job to finance their investment, as bank loans need to be paid off, not only to reduce debt, but to improve their credit in order to expand their investments if they wish to do so in the future.
It Takes a Certain Kind of Person for Property Management
There is a difference between knowing how to spot and exploit real-estate markets and having the capital to invest and actually knowing managing those said properties effectively. If you are like me, you might be a little soft around the edges. If a tenant came to me with a sad story on why they were not able to pay their rent this month or even last month, I would be the type of person that would be understanding and compassionate.
Those qualities are not bad to have, by the way, but unfortunately, my generosity could probably be misinterpreted for weakness. I might be taken advantage of. Knowing that and considering my investment, I know I would personally seek outside help to manage my properties for me. I would need someone who is fair but has my investments in mind and would not compromise my return on investment by insuring that rent is payed in full and, most importantly, collected in a timely manner.
As a landlord who may be currently managing your properties, you need to take a critical look at your personal skills as a manager. Are you detail oriented? Are you able to remain organized while your tenants are submitting dozens of maintenance requests? How is your ability to establish working relationships with contractors who would be the ones solving your maintenance related issues? Also, are you able to keep a calm and level head when unfortunate events are beyond your control and you become the focus of blame and frustration from your tenants? These are all very real concerns, and if you have doubts about your abilities, it is time to start developing an alternative plan of action.
Crunching the Numbers
Before even considering hiring a manager for your properties, you need to ensure that you can afford to do so at this time. Managers come at a luxury price and as such should only be considered if needed. If you are successfully managing a few small properties on your own, there is really no need to invest in a manager at this time. However, if your performance is not up to par and you are actually losing money, it just may be time to restructure your management.
Signs that your performance may need some improvement can include: a large number of vacancies in your properties, high turnover, low lease renewals, and low customer satisfaction. These are red flags for poor performance, and they should be dealt with accordingly. Managers can provide an outside or secondary prospective on the operation of your property.
Managers can also take steps to recruit tenants, improve customer relations, which, in turn, encourages your current lease owners to renew the following year. As a rental property owner, having a reliable and satisfied base of tenants that pay their rent on time and renew their leases annually should be your ultimate goal.
Your Property Management Team
Every landlord has a specific arrangement of properties, skill sets, and a time frame to be able to accomplish their real-estate needs. Sometimes these needs require landlords to take a backseat to the management of their properties for the betterment of their business model and return on investment. Landlords should also take a hard analytical look at their process so they can improve where they need to or recruit help where they fall short.
However, I must conclude by again issuing a word of caution; outsourcing your management needs to be a calculated investment as the service is an added expense and should only be considered if it will improve your operation. At the end of the day, how you operate your business is up to you, and the choices you make will determine your return on investment.