There are many reasons why an investment property owner may work with a professional property manager to step in and aid in the management of their asset. This post discusses some of different types of clients professional property managers in Boston and the South Shore are working with.
In a way, all rental property owners are investors as all investment properties are assets. This group wants to leverage their analytical ability and talk about things like net operating income, cap rates, cash flow, and cash-on-cash returns. Investors are looking for professional property management. Good property management firms have had a coming of age and property owners have the right to demand a higher level of service. They should leverage their property managers for advanced property marketing through leveraging video walk-through technology, electronic on-time disbursements, accurate financial reporting, advanced knowledge of the market and understanding of where to set rent to maximize ones return on their investment. Candidly speaking, Boston and the South Shore lack the robust ecosystem of true full-service professional property management firms other markets enjoy - however there are a handful of reputable, investor grade firms.
It’s also worth mentioning that Massachusetts one of just several states not requiring individuals hold a real estate license to manage property. This seems antiquated and not in the best interest of the investor client. Property managers need to be able to understand markets, abide by fair housing regulations, and often work with other real estate agents towards an outcome that is in the best interest of the client.
Spread too thin.
We’re all busy enough as it is, nevermind throwing in the management of properties one doesn’t even live in. A lot of landlords that have managed additional properties on their own often no longer want the responsibility or headache.
This group of people are often getting ready to retire from their professional careers and are looking to do the same from managing their property. Often times the property may be paid off, or was at least purchased years ago, and the mortgage is now comparably low in comparison to the monthly income that can be generated through renting the property.
Paying a small percentage of the property’s monthly rent in exchange for professional management is an easy decision with the right property management company. It’s worth mentioning that a good property management company will also add value in terms of improving the return on your investment through higher, (but always fair), rents as well as through managing the asset more effectively and proactively so it holds its value.
Something bad happened!
Unfortunately, property managers hear this all the time.
A tenant you can’t get out or who won’t pay rent…
Vacant unit had a pipe burst...
Most property management firms will work with any one, or all, types of owner/issues listed above, but there are some who just aren’t interested in the headaches either. Either way, it’s much better to have a professional manage your investment before something happens. Many firms offer things like eviction protection, for example, which means they cover the cost of eviction proceedings as either part of their service or as an add-on.
Can’t sell the house.
This is a bucket Firms are seeing more of as a result of the slowing housing market. We recently had a family approach us because they had to move out of state for a job transfer and hadn’t been able to sell their house.
Said house was in great condition, wonderful neighborhood, convenient to the necessities, on a nice piece of land, listed by a great Realtor, etc. The problem was it just wasn’t the right time for this house to sell.
When the family approached us, we were able to provide a full, in depth report of what we thought the house could rent for, (this is something most reputable property management companies should do). After discussing what was proposed, the couple decided to list the house as a rental, while keeping it listed to sell at the same time.
The Realtor and I worked hand-in-hand, (a subject I cover more in depth in a separate piece), and the unit ended up renting to a very nice family within a very short period of time. It’s also worth noting that many people are reluctant to consider renting their home because they feel it’s a long term decision, however I always encourage people to look at their home as an asset and a potential additional income source.
Switching Property Management Firms.
This happens all the time. As an owner, people have high expectations of their property management firms - as they should. The industry average on client attrition is about 20% - that’s a tough tail to catch as you’re trying to grow your property management business..
This is often the result of unrealistic expectations of the owner in conjunction with a lack of communication from the property manager.
In the next post, we’ll focus on additional core competencies including:
- Determining rent
- Marketing a property
- Screening tenants
- Rent collection/ ongoing tenant management
- Accounting & financial reporting
- Tenant turnover
See you next time!