Rental properties have found themselves at the top of investors’ wish lists for quite some time, and for good reason: few investment vehicles award savvy entrepreneurs the ability to build wealth like a rental property (and passively, might I add). Assembled correctly, a well-devised passive income portfolio can become your golden ticket to your golden years. There is no reason a sound rental portfolio can’t pad your bottomline now, and well into retirement. You would be wise to remember that.
It’s worth noting, however, that despite being labeled passive, rental properties aren’t without their caveats. While it’s entirely possible for a great rental portfolio to generate income passively, you must put in the legwork ahead of time to get to that point. And therein lies one of the biggest mistakes investors make with regards to rental properties: they underestimate them. Perhaps even more specifically, they think they can manage the property on their own, without skipping a beat. And while it’s true that some people can do so, most are grossly outmatched by the commitment required to run just one rental property.
When all is said and done, far too many investors make the mistake of not hiring a property management company. While doing so will incur a minimal cost, often a percent of the collected rent, the cost of admission is well worth it. Hiring a property management company can be so helpful in operating a rental portfolio that I am baffled some choose to forgo the option altogether. I maintain that those passive income investors that neglect to hire a property management company are more inclined to, as they say, make a mountain out of a mole hill.
While enlisting the services of a property management company is by no means necessary, I can make the argument that it’s in your best interest to at least consider the benefits that have become synonymous with third party rental property support. If for nothing else, the right property management company can not only take a great deal of stress off of your shoulders, but it can also help elevate your investing portfolio to new heights; heights you never thought imaginable.
The most important benefit of working with a third-party property management company isn’t founded on tangible fundamentals alone, but also on time; the one thing we all want more of. While I am confident the right property management company can simultaneously decrease risk exposure and increase profit potential, nothing is more valuable to the passive income investors that choose to align themselves with a property management company than the time it creates.
There is no doubt about it: Time is an asset we can all use more of, but I digress. It’s not the gift of time that is so valuable, but rather what you do with it. You must be proactive with the time you are given if you hope to realize your true potential as a passive income investor.
Instead of acting as landlords themselves, those passive income investors working with their own property management company can devote more time to building their rental portfolio. It’s only through the help of a property management company that you will be able to own and operate several passive income properties, not the least of which can contribute to your bottomline immeasurably. Subsequently, those that neglect to hire a property management company will find themselves with one choice, and one choice only: to manage the property themselves. And as I am sure you are already aware, acting as a landlord is just about one of the most time consuming activities known to investors.
If that’s not enough to convince you that a good property management company is worth its weight in gold, I encourage you to keep reading. Not only will aligning your real estate business with a third-party property management company free up your time to focus on more important matters (like expanding your portfolio and scaling your business), but choosing to do so has become ubiquitous with additional benefits:
Screening & Finding Tenants
You could argue that a passive income rental property is only as good as the tenants it’s housing. After all, it’s the tenants that are expected to front the rent, not the owner. And if that’s the case, there is no reason you shouldn’t try to and find the best tenants possible, which is a lot harder than it sounds. A lot rides on the tenants you find for your properties, and the more you can do to mitigate risk, the better. Fortunately, experienced property managers have made a living on finding good tenants for respective investors. Instead of relying on blind intuition, or accepting the first tenant that comes your way, place the fate of your property in the hands of a trained professional; one that knows exactly how to vet tenants. At the very least, placing the responsibility of finding a good tenant on a property manager can increase your chances of finding the perfect tenant.
When all is said and done, there is one word every rental property owner is afraid of: vacancy. In the event a home remains vacant, there is no cash flow to supplement the current owner’s mortgage. It’s worth noting, however, that the bast way to reduce vacancies is to reduce tenant turnover. In seeing to it that your tenants are happy, they will be less inclined to move and leave you with a dreaded vacancy. And, as it turns out, property management companies know how to keep tenants happy. The best property management companies exhibit an increased propensity towards responsiveness, availability and and an inherent ability to handle problems as they arise. Those renters that feel as if they are important enough to warrant such exceptional service are not only less likely to look for another place to live, but also more willing to accept rent increases. You would be amazed at what a little TLC can do for those living in your homes.
Collecting Rent On Time
Unless they own the property free and clear, most rental property owners are obligated to pay down their mortgage on a monthly basis. That means they rely on a steady stream of rental income generated by the property itself; nothing is more important, in fact. I can’t stress it enough: it’s absolutely imperative that rental owners collect money on a regular, consistent basis. And whether they want to believe it or not, not every tenant is going to be willing and able to meet their rental obligations month in and mont out. It’s a sad truth, but a reality nonetheless: there will be tenants that avoid paying on time.
It’s wroth noting, however, that property management companies don’t get paid until you do, so it’s in their best interest to see to it that rents are collected. Not surprisingly, this is another one of their specialities. Property management companies can see to it that rents are collected on time, and enforce the rules outlined in the lease agreement.
I want to encourage every rental property owner to at least consider enlisting the services of a good property manager, as they can make your dream of owning a profitable rental portfolio a reality.