You’ve taken the plunge. The rental market is bursting at the seams with potential and your dreams of conquering the real-estate market are about to be realized. You’ve got the perfect property. Check. You’ve established your consumer base (rentals). Check. Your location is desirable and the timing couldn’t have been better. Yet there is still that unshakable squeeze on your stomach and your wallet. You’ve taken risks before but real-estate is a brand new game for you, and the market is still recovering. The burning question in your mind is, how can I maximize my ROI, and how soon will I start to turn a profit .
Firstly, congratulations on taking that leap of faith. The real-estate market is truly what we make it, taking risks, and investing in the market is the only way to keep it alive and well. So kudos to you! Secondly, congratulations aside, its time to take some innovation. Its great that you have taken this risk to better yourself, but what is risk without strategy? Real-estate and owning rental properties is comprised of thousands of variables that are all consequential to your success or failure. Some of these variables include, your tenants, your property itself, and your ability to manage it all.
Now you’re asking yourself how can you properly deal with all the intricacies that owning and maintaining your rental property and also ensure that the process results in maximum profit? I have two words for you. Rental Management! You need to consider what form of rental management you need. Rental management often comes in the form of a dedicated firm with their own team of employees to manage your properties. There is also rental management software. With the software you have a personal and hands on approach to how you handle your properties. Which option is best for you? Can you manage the tens if not hundreds of accounts you are sure to accumulate over time? Can you, alone, keep up with maintenance, collections, fines, lease dates, and evictions. Feeling overwhelmed yet? If you aren’t informed and involved with determining your solution, you should feel overwhelmed. If you end up overwhelmed and unprepared, your ROI will suffer substantially. Which rental management option you choose will be determined greatly by your personal preferences, the number of units and variables involved with your rental properties, and finally your budget. As you can imagine, remaining within the constraints of your budget will present the most direct affect on your return on investment. While you are learning the trade, it may be beneficial for you to hire a firm to manage your properties for you, while you learn whats involved in management. When you feel comfortable, perhaps you can move to a rental management software, that you can personally handle, or have your local staff tackle. No matter your decision, there needs to be some degree of involvement on your part, to stay informed on the logistics of your business, and to know exactly where you are financially.
Monitoring your portfolio is the only way for a rental property owner to have a precise and in depth look at their bottom line. This includes, your expenses, revenue, and clients. As you can imagine your expenses will broaden further than your mortgage, especially with rental properties. Maintaining the property for your tenants will be a constant battle, which will exponentially grow as the number of properties you own grows. What may seem like minor slip ups or lapses in judgement can be very costly for you. There is a reason you require your tenants to adhere to a strict payment schedule, or follow property policies you have set in place. The simple reason is that you have expenses to pay and your collectors expect timely payments as well. Not to mention, you are trying to generate a profit as well. That’s why placing and enforcing payment dates and policies is of utmost importance.
Enforcing late fees is just as important. It isn’t a matter of compassion or spite, you are operating a business in a competitive market that has real consequences for you if your financial goals are not met, more so than the $50 late fee you are charging your tenant. If you are a “softie” or easily manipulated by the woes of tenants you will lose sight of your goals, and very well might let much needed profit slip through your grasp. This is why rental management exists. Whether operated by software or a separate firm, the difficult choices regarding late payments or enforcement is provided for you to decide, allowing you of focus on your properties most important aspect, which is your return on investment. However, by no means am I encouraging you to only value the revenue your tenants bring in, after all they are still human and keeping them satisfied with your accommodations is what attracts attention to your properties. Ultimately enforcement of your policies and your demeanor with your tenants is up to you. It is encouraged of you to strike the proper balance between the enforcement of your policies and the appeasement of your tenants with the ongoing operations at your rental properties. Your properties need to be appealing to potential tenants after all, and nobody likes landlords who are impossible to deal with or unreasonable, but on the flip side, a lax landlord will let their properties delve into chaos, which is also undesirable.
Unfortunately, rental management cannot coach you on the interpersonal aspects on how to manage rental properties and how they relate to your tenants. However rental management, by its inherent nature, makes it an essential consideration for anyone involved in owning real estate properties or managing rental properties. Achieving your return on investment is the entire premise of real estate, so it makes sense to be prepared for whatever the market can throw at you so you can maximize your profit and create the life you’ve always wanted for yourself and your family.