Real Estate Owners and Investors: Are You Sleeping?
Consider this story about a fictional couple named Peter and Sarah, who, like many others, decided to make rental property ownership a part of their retirement planning. Peter and Sarah had been researching the rental property market in their town for almost a year before finding what they were looking for. It was a ten-unit building in a reasonably good neighborhood. Eighty percent of the units were occupied, and twenty percent were in need of minor renovations and cosmetic repairs. After negotiating a fair price and obtaining financing, they took possession of the property and set about fixing up and renting out the vacant units, doing most of the work themselves on weekends. Work moved quickly and they were able to fill the remaining units without much hassle by showing the apartments after work on nights and weekends. Things were going very well, just as Peter and Sarah had hoped.
Of course, the calm did not last. Peter and Sarah began receiving complaints from tenants. Most of the phone calls were about minor problems: clogged toilets, a broken refrigerator or dishwasher, a lock that didn’t work properly; but as anyone who has ever managed a rental property knows, the tenants wanted the problems fixed yesterday. Peter and Sarah would come home from a long day at the office to find their voice mailbox full of messages from their tenants, each one more irritated than the last. And of course, since they both worked full time, they could only deal with complaints in the evenings. Occasionally, a call would come in at 1:00 or 2:00 in the morning from a tenant complaining about a noisy neighbor. Added to the extensive bookkeeping they had to do for taxes, as well as rent collections and routine maintenance, his property began to have a serious impact on their personal lives.
The mistake that Peter and Sarah made was not buying a rental property; rather, it was from not budgeting properly. No, not budgeting your money but budgeting your time. Although they had a lot of drive and determination, they underestimated what it would take to run their 10-unit building. Collecting rent, tracking maintenance and repair issues, advertising and renting vacant units, resolving tenant complaints, and keeping the books all take time, and often much longer than many first-time homeowners and investors. they are ready. As one new owner recently said, “I was making some money, but it was like having a second full-time job.”
The news, however, is not all bad. There are a couple of things you can do that will allow you to own rental properties and get some sleep.
oh Professional property managers – Wherever rental properties exist, you’ll find full-time property managers and property management companies that will handle everything from rent collection to maintenance, tenant searches and bookkeeping, according to the company. The downside, of course, is that professional property managers take a percentage, and in many cases a hefty percentage, of the gross monthly rent collected, which has a significant impact on the owner’s bottom line. Hiring the services of these companies makes sense for the passive real estate investor who is willing to sacrifice some profit and control for peace of mind.
oh Online Property Management Software – An exciting new innovation in rental property management is the use of online property management software to automate many of the functions traditionally performed by professional property managers at a fraction of the cost, starting at $20 per month. Online property management software helps property owners and investors keep maintenance and repair records, respond to tenant inquiries, advertise vacant units, track income and expenses for tax purposes, and even collect rent online. Online property management software is for real estate owners and investors who want more control over their bottom line. Although this option requires the active involvement of the owner or investor, online property management software significantly streamlines many of the most time-consuming aspects of property management, making it an attractive option for do-it-yourselfers. .
Over the past century, investing in residential real estate has proven to be one of the best ways to build wealth over time, as well as provide a steady income for thousands of homeowners and real estate investors alike. The key to success is to treat your rental properties like a business and then get the help you need to run it efficiently. By taking the time to consider which property management option is best for you, you’ll discover that it’s possible to profitably manage rental properties—and get some sleep!