Property management appears to be an easy way to make an income in the real estate business; show a property, collect rent and keep a negotiated portion of the rental income, easy; right?
As I look at the limited number of available rental properties our company currently has, I often wonder if an owner of the property would live in their investment property. What would they think if they walked into a unit looking like theirs; would they be interested or why would they be disgusted? We understand the current real estate market can be difficult, with many properties, upside-down in value, it’s often difficult to absorb the cost to ready a unit for the next tenant but it needs to be done. Profit margins are often very thin and in some cases, negative cash flow can be expected and property owners need to be aware of the pitfalls that come with real estate investment. Owners need to evaluate their long term financial goals with their current list of properties and determine if a property is going to be a cash drain, (or will they make up the difference when the property is sold). In some cases, investment property should be sold now, at an initial loss, to prevent a long term cash drain, unless you can feasibly forecast an upswing in property values due to a foreseeable development or re-development in the area. Or perhaps, your long term goal is to own several properties free and clear and have a steady income down the road for retirement.
So what does the potential renter want in a rental properties today? They want to see the highest value for their money in their residence. When they walk into a home or condo and see handprints on the walls, worn/stained carpet, old appliances, over-grown landscaping and faded/worn exterior paint, don’t expect them to jumping for joy to move into your investment property. They want to see fresh paint, clean or new flooring, appliances that are clean and energy efficient. They want modern bathrooms and light fixtures and a place where; when they invite their friend over, they will be impressed with a quality home.
So what can you expect from a rental property that doesn’t share the aforementioned qualities? Look for negotiated lower rent, one term tenants, higher than normal service calls for repairs and a loss of visual value for the next showing of prospective renters. You also have to remind yourself; people are going to pay rents at the maximum they can afford in an attempt to increase their standard of living, (live above their means), and when they lose, (in their mind), the value of your property, expect slow pay and sometimes eviction costs. Can the same thing happen with a nice property? Yes, but chances are, at a lower percentage than a property that needs upgraded.
We have a State Certified General Contractor, who is an experienced investor, on staff, which will evaluate the condition of your property and give you a competitive bid or a feasibility opinion on whether you should invest in the property.
We have to make some current decisions on whether we are going to continue marketing some of the properties we manage or just refer the owners to another company which markets rental properties of lesser standards. If you have an investment property or are thinking about getting into real estate investment, we encourage you to sit down with us and let us help you evaluate your current real estate situation and show you how to establish a long term real estate portfolio. Let our investment experience work for you and increase your long term financial goals in real estate.
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