Should You Manage Your Own Rental Property? What Investors Should Know About Property Management
One of the more important questions you need to answer before you make your first real estate investment is "just how involved do I want to become in the operations of my real estate investment?"
For unlike decisions you might have made in the stock market, which was whether to buy or sell and did not entitle you to make any decisions regarding the operation of the company, with investment real estate, you are in control and must now make the decisions that will affect the operation of your investment.
Once you invest in real estate, you become the CEO of your own individual real estate investment company so you have to decide just how involved you want to become.
Factors to Consider
Time. How much time do you want to spend? Foremost, do you even have any free time to spend? You may have a full-time job with zero hours to spend. On the other hand, you may be retired and have nothing but time to spend; as a retiree, perhaps owning a real estate investment property is what you need to keep active. You get the idea.
Stress. How much stress can you handle? Maybe you have the time but maybe you hate the thought of talking to your tenants about repair issues, rent increases, late payment issues, agreement violation issues, and so on. In other words, maybe you just dread the thought of confronting tenants, period.
Sacrifice. How much are you willing to sacrifice to maximize your profits? Yes, we all want to become wealthy, but that's not likely to happen unless we inherit a fortune. So we should accept the fact that we either devote the time and deal with the stress or leave all the management responsibilities of our rental properties to someone else.
Types of Management Available
If you own rental income property and prefer to leave it to someone else then you have two phases of management open to you: resident management or property management.
A resident manager. This is someone who is hired that lives in the building and will take care of the day-to-day problems that may arise in owning rental income property. He or she should spend a lot of time at home, be conscientious, maybe something of a handy-person, and should get along with the other tenants in the building.
In this case, you might want to rely on the judgment of the previous owner or just pick an individual (or couple) who is of retirement age and is usually there, or can perhaps find a young married couple happy to get a break on their rent.
A professional management company. Their job would be to find tenants, show the apartments and negotiate leases, collect the rents, pay the bills and mortgage payments, keep bookkeeping records, make sure the building and grounds are properly maintained, and so on. In other words, to run the property as you would.
How Much Management Do You Want?
Okay, now that you're acquainted with the management-intensiveness of investment real estate, and see that you can become as active or inactive in the operation of your rental property investment as you choose, how much management do you want?
Here's a suggestion.
If you are able to find the time and can cope with the stress level, try managing the property on your own.
If you're working with a knowledgeable realtor who specializes in investment real estate, he or she can give you enough guidance for you to become familiar with the operation and management of your property.
Other wise, if this is not your first venture into real estate investing, or you simply cannot find the time to manage it yourself, then consider hiring a professional management company.
The important thing is not to let the thought of possible management problems keep you from investing in real estate. Rental property management and the problems of management can be avoided.
About the Author
James Kobzeff is a real estate professional and the owner/developer of ProAPOD - leading real estate investment software solutions since 2000. Create cash flow, rates of return, and profitability analysis on rental property at your fingertips in minutes!
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