Rental properties can provide a good method of wealth building, especially when the cost of buying property is lower than it has been in previous years and rents remain high. A real estate investor who has good credit can get a loan with a small down payment, buy a rental property and let the monthly rent make the loan payments.
There should be enough rent left to take care of necessary repairs and expenses as well as provide a profit for the landlord. When you can get a good deal on a rental house or apartment building, it may prove to be a smart investment if you are not a good manager to hire an experienced property manager.
Before deciding to become involved with rentals, a real estate investor must weigh all the pros and cons of the venture. One of the most important decisions is whether you want to manage the properties yourself or prefer to leave the details to a manager.
Following are some of the pros and cons of each decision, and they may help you decide which management program would suit your situation best.
Being a Landlord
- You will not have to pay someone to do what you may be able to do yourself.
- You will have your best interests at heart when making decisions about which tenants to choose, what repairs to make, when to evict tenants that do not pay and numerous other matters.
- You can invest in real estate properties in other cities as well as in your own area and have someone nearby to manage them.
- You will get calls whenever a pipe breaks, a drain clogs or anything else occurs that needs attention in one of your rentals.
- You will have to determine which tenants will make the best renters.
- You will need to collect rent and attempt to collect from those who say they cannot pay yet.
- Managing your own rental properties may take more of your time than you want to devote to them.
- If you do not have experience in managing rental properties, you may find that you have higher profits when a manager with experience handles the details.
Hiring a Property Manager
- An efficient manager can relieve the stress that any real estate investor has from managing rentals.
- Many managers will work for a percentage of the rents, so you will not have to actually pay them, you will just get less rent money.
- You can ultimately make more money by using a manager or management company to operate your properties because they enable you to invest in more properties than you could possibly manage yourself.
- You will have to pay your manager a fee or percentage of the rents.
- Your manager may be more interested in getting repairs made quickly and easily than in doing them in the most economical way.
- Your manager may not be as careful about your property or about selecting the right tenants as you would be.
If you own apartment buildings with at least 15 units, you may benefit from hiring a manager to live in one of the units with their family, so they will usually be available to handle any problems that arise while they are still minor. A manager who could double as a maintenance man would be particularly helpful and save you the cost of hiring a plumber, carpenter or someone else to handle most repairs.
Free rent can be partial payment for a resident manager, and a percentage of the rents can make up the remainder. One live-in manager per building would be ideal. However, most landlords who have a resident manager also hire a property manager to handle all the duties of overseeing and operating the properties.
Even though hiring a manager or management company is an expense, their experience and efficiency could ultimately save you money and will definitely save you time and possibly stress as well.