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The Secret To Managing Rental Properties

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I wish I knew all of the answers 6 years ago.  If I did, my real estate investing journey would have been a smooth one.

Wait.

Let me take that back.

The journey would not have been ‘a smooth one’.  Rather, it would have been much ‘smoother’.

Is smoother even a word??  I am not sure.  It is late and I have been knocking on doors non stop for my friend Max these days.

What I am sure about is this…

If you are a new real estate investor, you need to read this article!

Without question, new real estate investors have false beliefs about the reality of managing rental property.

It has been my experience, speaking to countless new investors, that they all panic about the idea of managing their own rental property.

If you are a new real estate investor, and you are reading this, you may think that I am speaking directly to you.  The truth is that I am.  I am speaking to all new real estate investors.  So please listen up!

The Secret To Managing Rental Properties

My property manager friends and property manager readers are not going to like what I am about to say…

If you are a new real estate investor, and you have just bought your first rental property, you must manage your rental property on your own.  That’s right… on your own!

There is one caveat to this however.  If the property is too far away from where you live (several hours drive) then it is acceptable to use a property manager.  However, if the property is closeby to where you live, you must manage it yourself.

Too often I speak to new real estate investors who think that they can simply outsource the task of managing their property to a property manager.

If you do this at the very begining of your real estate investing career, you are in for some serious trouble.

Serious Trouble

The serious trouble I speak of occurs when you simply do not know how to manage your property.  When you are managing the property on your own you are in constant contact (or at least should be) with your tenants.  In addition, you periodically should be visiting your property as well, in order to monitor the upkeep of the property.  If you outsource these taks to someone else, like a property manager, you are making 2 big errors at the very begining of your real estate investing career.

Your Two Big Errors

Your first error is:

A non existent relationship with your tenant

Real estate investing is a misleading term for buying investment real estate.  The act of buying investment real estate should be called ‘tenant relationships’ or something to that effect. The faster you can learn that you have to have  great relationships with your tenants, the more successful you will be, and chances are the longer you will keep at it.  (investing in real estate)

Your second big error:

A lack of property inspections

Plain and simple:  No one will care for your rental property like you would.  This includes property managers.  As  a new real estate investor, it is YOU who has to take the responsibility of inspecting your properties now and then, and making sure that the property is being taken care of.

If you are not keeping your eyes on your property, the smallest maintenance issue can slowly become a major repair.

Example, after a recent inspection at one of my rental properties, my handyman and I noticed some water damage in one of the bathrooms.  We are being proactive and taking care of this issue by doing some repairs.  Had we not noticed this, and if this problem was left for too long…it would have turned into a major problem and a major repair, costing several thousands of dollars.

New Investors: Take Note

I am not writing this article for fun.  I am writing this article to hopefully help some new real estate investors understand one thing.

Manage your rental property yourself!

Do not rely on anyone else to do this.  Your life will be much less stressful if you manager your properties on your own.  How do you think I know this?

Onwards and Upwards,

Neil Uttamsingh

ps: New real estate investors, sign up to my blog today.  Through reading my blog you will get hints, tips and tricks to help you buy your first rental property.

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12 comments

1 Kaye Dennan { 04.27.11 at 2:40 am }

Neil, I can see your points but can’t say I necessarily agree with you. In the ideal world I would totally agree with you.

My comments would be that many first time investors are rather green with the law and all it implies, plus often times they are not strict enough with enforcing the law if they have problems such as late payers, tenants who damage the property, insist on making excessively loud noise at night, etc.

I am a believe that an investor should outsource the property management initially, but insist on 3 monthly inspection reports with photos and should personally inspect the property at least once a year. Also ring the property managers every now and then for a chat about any possible problems.

I read a query once that said something along the lines, “I employed a property manager, but I never heard from them!” Dah! Communication is a two way thing.

Interesting to see both points of view.

2 Al Clipper { 04.27.11 at 9:29 am }

Neil
I must say that I agree with your comments. I begin investing around the same time as you. I bought a 3 unit, fully occupied at the time of purchase from a long term owner, who was very hands on and recommended that I do the same. I hired a property manager who completely ripped me off and I had to fire some 2 months later. I self managed that property up until my last original tenant moved out and the property was completely vacant. That time that I managed the property I made a lot of mistakes and I learned from those mistakes. I subsequently found a great property manager, as I did not have the time to travel back and forth. I interviewed several managers, checked references and finally chose a firm that I am very happy with.

3 Andrew C. MacDonald { 04.27.11 at 12:46 pm }

Hi Neil,

Glad to see you back with another post. I think the 2 errors you bring up can be addressed while still using a property manager. We do annual inspections AND create positive relationships with our tenants but use our property managers to handle day to day operations.

I am a big fan of using a property manager and letting them do what they do best. The caveat here is that you need to find a GREAT property manager otherwise you spend money to end up with extra headaches.

I don’t want to worry about showing properties, rent collection, tenant phone calls, or anything else that will zap my energy and enthusiasm for the business. By hiring someone else who is better at these tasks, I can concern myself with bigger picture items that will continue to grow my real estate business.

Maybe this approach will eventually land me in serious trouble as you suggest, but I like to think it is the best way to run my real estate business.

Cheers,
Andrew

4 Shae Bynes { 04.29.11 at 7:11 am }

My husband and I opted to manage properties ourselves the past couple years, but I suspect that as we’re acquiring additional properties at some point soon we’re going to be getting a property manager in place (otherwise owning them could be a total drag). I figure that we should start our search for a property manager now so that we know who is good and reliable before we actually need one.

5 Pere { 07.30.11 at 12:02 pm }

I agree with Neil, no one will care about your investment as much as you. After all you have everything to lose, property managers have no vested interest in properties they manage. Just as mutual fund managers have no qualms nibbling on their annual management fees, while our 401K’s acts like a roller coaster. Down today, down tomorrow and a lot less when we reach 59.5yrs.

On the other hand, managing tenants and fixing repairs can be a time consuming and expensive hassle. No one likes to spend sunny Saturdays looking for leaking pipes in spooky basements. But that can be solved by pruning problematic tenants right from the rent application stage. Viz, apartment application forms that asks tenants how handy they are and how willing they are to make repairs? Also a lease signing gift is usually a gift card to Home Depot with a tool box……….seriously. After all what can tenants buy at Home Depot except condiments to spice up your investment property.

Geting a trusted “fix it” crew of plumbers, electricians and carpenters can make your life easier. But be careful, you will still need to watch them like a hawk.

Neil thank you for your blog, you really help in letting the stress ease off into the sky.

6 Chuck H { 10.29.11 at 6:38 pm }

Neil,

Just ran across your blog. I completely agree that new investors should start by managing their own properties. My wife and I still manage our own after 6 properties. At some point, a property manager will be necessary — but the lessons we have learned by self managing are very valuable.

This will also insure that you understand exactly what your property manager is doing once you do need to hire one. If you are not knowledgeable I could see you getting taken advantage of.

Your posts are detailed and thorough – I like them…

Take care.

7 johnny { 09.22.12 at 9:06 pm }

how much should i charge to manage a property is there a number or figures i can make

8 neil { 09.22.12 at 9:50 pm }

Hi Johnny,

Thanks for the comment. The fee for managing a rental property can differ depending upon the location. Where are you located?

Regards,
Neil

9 neil { 09.22.12 at 11:04 pm }

Chuck,

Thank you very much for the comment. I appreciate it, and I am thankful for your support.

All the best,

Neil

10 neil { 09.22.12 at 11:20 pm }

Pere,

Thank you for your kind words!

Our of curiosity, where are you located and do you currently own rental properties?

Best Regards,
Neil

11 johnny { 09.23.12 at 12:16 am }

moline illinois

12 johnny { 09.23.12 at 12:47 am }

im the manager of a new building just looking for advice im charging 10% for management doing all maint my self charging him for labor and he pays for materials anything im missing and what a hour should i fairly charge and how should i structure any of this he will call me when there are issues and ill take calls from tenant i need help i want to make a living off this i have a few other properties coming soon want to get my act together and not learn from my mistakes

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