The investment property dilemma
Investors seeking diversification have frequently turned to a rental property or collection of rental properties to balance and spread risk across their investment portfolios. As with any investment, people need to consider all the problems, problems, and pitfalls along with the potential returns. Unfortunately, many investors are unaware of potential problems and don’t take the time to investigate these issues before closing the escrow. A property management course and a basic real estate investment course would be a great investment of time for someone who views rental properties as a long-term source of income and investment. Some of the issues and concerns are discussed below.
Inexperienced agents and uneducated investors make a deadly invention
Rental property investors often use the services of an inexperienced realtor who does not fully understand rental properties, who does not fully understand return on investment, and who does not fully understand what capitalization rates are. Most of the time, these investors simply turn to their friend “the realtor” or use any real estate agent they are familiar with or comfortable with to buy this type of property, sad as it may sound.
The fact is, most real estate agents are not smart enough to understand rental properties, cap rates, cash yield, return on investment, leveraged investment, and common terms associated with rental properties. investment. Compounding this fact, most investors are initially equally inexperienced and lack the proper experience to locate and purchase a high-yield investment property. No one needs to look beyond this question: Why would a homeowner be selling a high-yield investment property? That question should be the first of many asked by both the broker and the investor. One problem is that some investors are so excited to get into a property that they look beyond the truth and numbers and just want to take control of the property. This is often a flawed approach because most agents will hesitate to stop the anxious buyer for fear of missing out on a good commission.
The property management profession is an equalizer
After an investor has closed the escrow, if the inexperienced agent has not offered to ‘manage’ the property for them, many of them decide to manage the property themselves (only licensed real estate brokers can manage rental properties). When these unsuspecting landlords are faced with the niceties of Fair Housing laws, Equal Opportunity issues, civil rights issues, nondiscrimination issues, bad tenant selection issues, notices of non-compliance issues, eviction issues, and, finally, collection issues, many times they turn to a professional property manager or property management company to help rescue their sinking ship.
If salvaged on time, a professional property manager can reverse an investment property and help the investor’s decision pay dividends. With a competent property manager, the return on investment can be realized and the owner can really have time to enjoy the investment, without pampering or worrying about it. The property management company will take care of the investment, maintenance, tenants, and all attendant problems associated with the property.
Property Management Education Course
Educating both inexperienced realtors and novice investment property owners about prudent property management is critical to maximizing the investor’s return on investment. It is rare for a homeowner to successfully manage their property or properties and get the most out of it in that particular market. The reason it is rare is because the typical owner-manager is not using the latest and greatest property management techniques, software, selection procedures, and most importantly, not keeping up with the changing laws between owners. and tenants. Every January several laws are enacted seemingly increasingly favored by tenant-debtors that most people are not aware of. When a new law goes into effect, that’s another potential danger that the lone ranger owner must violate and end up on the wrong side of the complaint.
The surefire way to fix this potential problem is to hire a property management company to manage and protect the owner’s investment and most importantly maximize the return on investment. Another way to fix this problem is to have all landlords take a property management course and learn the profession from scratch without going through the heavy blows of experiencing tenant problems first hand.
Finally, a homeowner could hire a property management company that, in addition to all the typical staff, also has a real estate attorney on staff who can solve and answer all the legal questions that seemingly end up front and center. This would be a truly informed and easy decision for the owner to make.