Property Management
Why Property Management Is a Good Idea for Landlords
Leasing property is a very lucrative business. You can readily increase the return on your investment by using property management services. What can property managers actually do for you so that you get more from the money you have invested?
Property management increases your chance of finding reliable and paying tenants. Once you submit your property’s portfolio to the service provider, they will use their expertise to find tenants quickly. In fact, the main aim of most companies is to ensure that the house, apartment or office you are renting does not stay uninhabited for more than a few days.
Managers preserve the value of your property. The professionals working at the company you hire will take care of the all the maintenance. They will use the service of professional inspectors before the unit is rented. They will respond to complaints from tenants and will fix the problems timely. If the unit remains uninhabited for some time, the property managers will provide regular monitoring to ensure it is in perfect condition when tenants arrive.
Property management services include payment collection and financial reporting. You will not have to deal with the tenants directly, when it comes to getting the monthly rent. This will be done for you and you will be sent a complete report on the payment collection. Simply put, you can focus on your business, while you automatically receive your dividends from investing in real estate.
Managers handle disputes, evictions and even court hearings, if necessary. It is extremely beneficial to use the services of someone with legal knowledge in real estate. In this way, all disputes and evictions will be settled timely with minimal or no losses for you.
Entrepreneurs are Different (and so are Great Landlords)
We all instinctively sense that entrepreneurs are different. But what is it that makes an entrepreneur tick? What makes an entrepreneur successful? What is the entrepreneurial mind-set? Let’s explore the elements of the entrepreneurial DNA.
You may have a day job, but if you are an income property owner you are also an entrepreneur. But be careful, if you use your employee brain to deal with your entrepreneurial endeavors, you could fall short as a landlord. Here’s why:
Value Extraction Mind-set vs. Value Added Mind-set:
Employees (and professionals) trade “time” for money. When an employee “checks in” the money clock starts ticking (professionals call it “billable hours”). An employee wants to know how much money will they make per hour, what are the benefits, etc. This is a value extraction mind-set.
The purpose of making this observation is not to pass judgment, but to point out an important distinction in mind-set so you can cultivate the mind-set that will be most productive and profitable to you as an entrepreneur.
Entrepreneurs trade “added value” for money. An entrepreneur has to have a value added mind-set. Further, an entrepreneur’s money clock doesn’t start when he or she “checks in,” far from it. An entrepreneur has to produce a product and/or increase the value of something, and sell it for more money than the entrepreneur put into producing (or renovating) the product, in order to get paid. The entrepreneur gets what’s left over after all the bills are paid, so there’s always that element of titillating (but hopefully “informed”) risk. If the entrepreneur fails to add value or fails to sell the product for a sum greater than the entrepreneur put into it, he or she will not get paid, regardless of the number of hours put into the endeavor.
Ka-Ching! That’s Your Curb Appeal Working for You!
Gosh, it is so cool to own a little rental property!
It’s (normally) growing in value, it’s a forced savings so you’re not tempted to spend your down-payment and growing equity on doo-dads and bright shiny things, your great tenants are paying your mortgage down every month, you can keep more money in the family budget every year because of the savings on your taxes, you will have nice passive cash flow from now through retirement, plus you’ll have something of value to leave to your loved ones or favorite charity.
Sweet!
But it takes constant vigilance to keep the property in good repair. On the front end, it can be painful when you’re shelling out remodeling bucks. But upgraded properties = an improved tenant clientele, an improved qualify of life as a landlord, an improved quality of life for your tenants, plus the value that will be added to the neighborhoods where your properties are located are all immeasurable benefits! Good landlords add a lot of value to the communities where they own property. It’s the ONLY way to do business as a landlord.
My son and daughter-in-law and I currently have rentals ranging from one-bedroom apartments to a few big gorgeous homes. Every single tenant has our cell phone numbers, we self-manage all of our units, plus we have time to run our other businesses and hang with our friends and family. That is the value of no deferred maintenance.
We didn’t do it all at once, but we upgraded when we purchased each property, and upgraded some more between each tenancy, so that now we have a great little residential rental business.
Renting Your Apartment
Before renting your apartment, protect yourself and your tenant from legal disputes regarding the condition of the apartment upon move-in and move-out. Landlords hire inventory clerks to draft detailed inventories of the property. These inventories provide both a pictorial and print description of the property. All landlords should consider this document before renting.
What is Included in a Property Inventory?
The document will detail all the contents of the apartment before renting to tenants, along with its contents. For instance, if the apartment contains light fixtures, drapes, blinds or any type of furniture, the condition of the property will be listed on the document. To avoid conflict, customers will draft these documents to list everything that is included in the apartment at the time of rental.
The apartment’s value and the value of the items at the time of rental are also included. Photographs are essential to documenting the condition of the apartment. Photographs are less disputable than a description that may be fabricated or misconstrued. All landlords will find this document essential to the rental process.
Why have a Property Inventory?
This document is essential to any dispute that requires a court trial or mediation. Most disputes may be settled between the landlord and the tenant with the document alone. Those cases that make it to court will be easily settled by a judge if proper documentation is presented during the course of the case. Typically, the property inventory contains enough information to settle most cases within a reasonable amount of time.
Legal fees, if the case goes to court, may be enormous. The property inventory is a money saver and time saver to help tenants and landlords avoid disputes over deposits and other damage to the property. Property Inventory may also be used for tax and insurance purposes.
Commercial Property Management – How to Fast Track Your Success in Managing Commercial Property
To be successful in commercial property management you should spend time in setting about knowing the different property types you will be managing and the ways to help them perform as an investment. Most particularly that is the differences in industrial, office, and retail property. They all have special elements of function and control. That is:
- Leases
- Tenants
- Landlords
- Improvements
- Community
Ultimately in working in commercial property management you have to keep the tenants and the landlord happy; a fully functioning well maintained and leased investment is the way to achieve that. Make no mistake here when considering a career in commercial property management; it is perhaps the most challenging and busy part of the property industry. It is very specialised and the skill base is diverse.
So what can you do to help fast track your success and skill as a commercial property manager? This checklist will provide you with some ideas and help you on the path.
- Get to know the ways to lease premises and the documents that support the process. It will be wise to talk to experienced property managers and solicitors to research the real facts and processes.
- Know how to market lease vacancies to the local tenants. That will normally include internet, newspaper, direct marketing, personal contact and signboards.
- Understand the differences in rents both in type (gross and net) and value (per unit of area measurement) as it relates to the various property types in your local precinct.
- Review the types of income that can be achieved from a lease to a tenant. That will include rent, outgoings to be recovered, car parking rents, storage rents, signage rents, and licenced areas.
- See what services and amenities tenants require leasing premises locally. Are those services and amenities readily available in most properties locally?
- What is the supply and demand for more space to lease in the local area?
- Inspect some existing lease documents and become familiar with reading them and extracting key lease matters. That would be things such as rent payments, rent reviews, option terms, arrears actions, default provisions, and incentive payments or bonuses to tenants.
- Understand how to interpret property income and expenditure, as well as the logic behind property budgets and business plans.
- Review the methods of property income analysis as it applies to property value.
- Know how to price a property for sale using a number of different processes such as summation, capitalisation, comparable, and internal rate of return.
- Get to know the maintenance processes that would apply to running commercial properties of various types, together with tendering and contract processes to be used on plant and equipment that allow the property to function successfully.
As can be seen from the list above, commercial property management is specialised. It is not hard but it is different. Through careful study and the gaining of knowledge, your career in commercial property management can be successful.