Investment property management. This is pretty much as close to passive income as it gets. You purchase a piece of real estate that you intend to use as a rental properly and you subcontract the actual management duties. Is it really the simple? Let’s break the concept of investment property management down a little bit.
Why would anyone look into hiring investment property management?
1. Create passive income.
Your income from the real estate investment will truly become passive if you outsource the management aspect of it. Managing an investment property can consume a large portion of your time (not to mention the late night calls when a home appliance stops working).
2. Hands-off management.
Some of us have more money than time. There’s nothing wrong with that. Some investors have plenty of capital and don’t want to deal with any additional stress. If you fall under this category, then property management could work out for you. The property management company will literally take care of everything on your behalf (collecting rent, finding tenants, replacing tenants, legal issue, etc.).
Now let’s answer the big question– Are the services going to be worth the property management cost?
1. What are your monthly cash flows? If you own a few rental properties you may not feel like managing all of them. Unfortunately, after you factor in monthly mortgage payments along with maintenance fees, you might just barely break even when you decide to hire a property management firm. Are you willing to cut back on your profits? How much are you going to charge for rent? All of these calculations must be completed prior to outsourcing your property management.
2. Are you knowledgeable in the field? For first time real estate investors it might be wise to attempt to learn the process instead of outsourcing it immediately. There are lots of tricks to the trade that we all need to grasp. There’s nothing worse than being financially ripped off simply because we didn’t know other wise.
3. How reputable is the firm? You need to look for a property management firm that has a strong reputation. Whether you need to conduct research online or call upon references, get it done. You’re trusting these people with one of your greatest investments. You need to ensure that they’re reliable and that they won’t put any schmuck into your unit.
At the end of the day, the decision to hire an investment property management team is going to take lots of research. When you’re prepared, I hope that you make a well-informed decision that allows you to sleep easily at night. If you have to take out short term loans cover the management costs, then you’re better off managing your own properties.
Good luck.
