/about/Property-Management-Strategy-Peter-Dazeley-The-Image-Bank-Getty-Images-57b8c8c03df78c8763cc15c7.jpg)
The great thing about investing in rental property is that it is not a one size fits all approach. There are options available for those who want to have an active role in management and for those who want to be more passive managers. To select the best management strategy for you, you need to understand your lifestyle and what your goals are as an investor. Here are five tips to help you decide on the best approach.
5 Tips for Selecting a Property Management Strategy
Before you decide which management strategy could be the best fit for you as a landlord, you should do a little self-reflection. You need to evaluate how much time you can, and are willing to, devote to the property, how much experience you have with the various parts of rental property management and your personality. These five tips can help you make the right choice.
1. Distance From Rental Property
How far do you live from the rental property? If you are a quick drive away, it may be easy to visit the property frequently to take out the garbage, perform maintenance, handle tenant issues and collect rent. If you are an hour or more away, driving two hours round trip to take out the garbage may not be the best use of your time.
Your time is valuable. You have to consider the opportunity cost of traveling to the property. You may think you are saving money by doing everything yourself instead of hiring a building superintendent or a property manager, but when you take into consideration all of the time you are wasting traveling to the rental property, you may actually be losing money.
You could be using your time more efficiently to find other investments or discover other money making opportunities.
You should also not immediately discard a potential investment because it is too far away from your current home, even if it is in another state. In these cases, a hands-on property management approach will be unrealistic.
A hands-off approach that involves hiring a local individual or company to handle daily operations can still make the investment possible. You just have to determine if you are comfortable giving over control.
2. Size of Rental Portfolio
How many rental units do you have? It is much easier to manage one rental unit by yourself than it is to manage fifty. The larger your portfolio of rental units gets, the more you may want to consider bringing in outside help.
However, it is not necessarily an all or nothing approach. You can remain in charge of certain operations, while giving over control of other operations that have become too overwhelming.
For example, you have 25 rental units. You feel like you can still manage the paperwork part of management, such as collecting rent, managing leases and screening prospective tenants, but the physical management and property maintenance, such as taking out the garbage, fixing leaky faucets and showing the properties to prospective tenants, has become overwhelming.
In this case, you may not need to hire a property management company, but hiring a building superintendent could be very helpful to you.
3. Level of Skill
You have to be honest with yourself about your strengths and weaknesses.
- Organization: Owning a rental property is a business. Successfully managing a business involves a fair amount of organization. For example, you need to know rent collection dates, lease expiration dates, when bills, mortgage payments and property taxes are due, when inspections will take place at the property, when garbage and recycling are collected and even when to change the batteries in the smoke detectors. Quicken Rental Property Manager can help you get organized. However, if you are still all over the place, hiring a property manager may be the best fit for you.
- Business: If you are not the most business savvy individual, there are two different approaches: get help, or, learn as you go. As a property investor, you need to have a business plan in place, a strategy for dealing with everyday operations and the all-important exit strategy if you need to get out of the property investing business.
- Maintenance: How handy are you? Even if you are handy, are you comfortable fixing any maintenance issues at your rental or would you rather hire a licensed individual to deal with the issues?
4. Desired Time Commitment
Are you more interested in being a landlord or being a rental property owner? If you are working another job 40-hours a week, it could be overwhelming to manage a rental property full time as well.
Either investment strategy is fine, as long as you understand what your goals are. If you like the idea of passively managing the property, more like investing in a stock, then an outside property manager may be the best fit for you. If you like the idea of active management, interacting with tenants and collecting monthly rent, then you will favor a more do-it-yourself approach.
5. Personality
Owning rental property is a great investment for all types of people. However, actively managing the property is not the right fit for everyone. You may be great with fixing all types of maintenance issues, but may have a short fuse when the actual tenant is complaining about the maintenance issue. Consider the following questions.
- How Do You Handle Stress? Are you able to deal with unexpected problems? Can you multitask? Problems will come up and they always seem to come up when you are on vacation or during a holiday weekend. Can you stomach this kind of stress or would you rather have someone else deal with it for you?
- How Do You Handle Conflict? Are you level-headed or more of a hot head? You will see a lot of tenant turnover if you are constantly fighting with your tenants.
- General People Skills: Do you like interacting with people? You may be great at finances, but horrible when it comes to human interaction. Having a middleman between you and your tenants could be a great option if this is your personality type.
