Let’s say you’ve made a resolution to get healthier. You join a gym. It has all the bells and whistles that should get you in shape and make you feel your best: new and clean machines, a swimming pool, maybe even a sauna. You’re paying a good premium per month, but you know it’s an investment in your health and it will pay for itself. But, the question remains: is this a good investment if you don’t actually use it to its full benefit? What if you only go once a week? Or what if you only use the same machine every time?
This analogy can be applied to investment property management. We know the benefits of real estate investment and how it can grow your wealth over time. However, just like having a gym membership and actually using it are two separate things, so is rental property investment and management. It’s not enough to invest in the perfect property, it has to be managed properly to reap the full rewards of ownership.
10 Common Investment Property Management Mistakes
There are several things to consider when managing a rental property, and here are 10 mistakes investors often make when trying to manage their own properties:
Mistake #1 : Establishing Rent
You may think you know your property’s market value well, but determining the right rent price takes some pretty detailed analysis. You don’t want to price your property too low and undermine your income goals. Furthermore, you don’t want to price too high and scare off the right tenants. Experienced property management requires truly understanding your rental’s location, amenities, and the surrounding market.
Mistake#2 : Leasing Agreements
So many owner-operators use standard leasing agreement templates found online and fill in their information. While these can be a good starting point, there are things a property management company would know that could help you save time and money when it comes to lease agreements. Lease documents are legally binding and are the primary proof supplied if ever you face a court proceeding, and certain states can require certain verbiage in them.
Mistake #3 : Insurance Help
As a landlord, you must have the right insurance for protection of your investment. Not having the right kind of insurance or the wrong amount could be costly down the line. A good property management company will work with you on making sure you have the right property and liability insurance.
Mistake #4 : Other Legal Issues
In addition to a standard lease, there are a whole host of other legal issues that may arise when you own a rental property. A tenant’s privacy rights and Fair Housing Acts are just the tip of the iceberg. Property managements companies are well-versed in investment legalese. They expertly navigate the legalities of property investment to manage your property. This saves you money and stress in the long run.
Mistake #5 : Tenant Recruitment
Finding the right tenant to occupy your investment can be a time-consuming task, especially if you are doing the correct screening process. Advertising your property, processing applications, credit checks, employment checks, etc. are necessary to make sure you have a responsible tenant, but unfortunately many owner-operators rush this process to get their unit filled.
#6 : Tenant Relationships
Once you find a good tenant, you want to retain them by forming solid relationships. Showing that you react timely to complaints or concerns, keeping the property clean and updated, and conducting regular maintenance inspections show you care. If you don’t have the time or know-how to do these things, a property management company could help.
#7 : Budgeting
Owning a property is not as simple as buying the property itself. Owner-operators need to understand how to properly budget for things like repairs, vacancy gaps and administrative costs that may arise.
#8 : Treating it as a hobby, not a business
Many get into property investment as a secondary form of income and long-term wealth. However, it can be a mistake to treat your rental property as anything other than a primary business. Property management requires separate bank accounts, an accurate bookkeeping system, and expertise in tax law.
#9 : Maintenance
To keep your investment in good shape and recruit and retain quality tenants, you will need to perform regular maintenance. Anything from landscaping to plumbing, minor to major repairs, will need to be addressed. More than likely, you are not a professional when it comes to repairs and renovations. If you try to do all maintenance yourself, you could face a lot of costly mistakes.
#10 : Time Management
Finally, all these items boil down to one thing: time. To manage things the right way, you need a lot of time to invest in a single property, let alone multiple. And many owners simply don’t have enough time to dedicate, especially if the investment is not their full-time job.
So, whether you are new or experienced to the real estate investment world, there are costly mistakes that can be easily avoided by hiring an experienced and reputable property management company like Auben.
Also, don’t make mistake number 11: hiring a single-service company. You need a property management company that will take care of every item above. At Auben, our proprietary Pods system ensures that we are meeting the needs of both residents and investors in the most timely and efficient manner. Happy residents stay longer! Long-term residents mean less turnover costs and more steady income for investors. Make your investment properties work FOR YOU!