Long Term Real Estate Profits Through Property Management

Someone once said, "If you don't manage properties well, then you are just a custodian for the properties until you sell them at rock-bottom prices to the next guy."

The goal of a good property management company is to maximize property profitability through maximizing revenue and keeping costs as low as possible. The company also gives property owners complete access to property and tenant information. This can be done through on-line software that is available 24/7.

Whether you pay someone to manage your property or do it yourself, if you are going to keep properties long-term, you need to understand what it takes to manage a property.

Tenants

Each property is an asset that needs to be maintained and improved on over the lifetime of the property. The cost of maintaining and improving the property can vary greatly, depending on the tenants.

Screening for great tenants can take time and energy, but experienced landlords say its worth it to avoid evictions and property damage. Some owners look at tenants as employees that safeguard, maintain, and utilize the property

Maximize Revenues

Revenue maximization is a function of keeping rents high and occupancy rates high. Occupancy rates are a function of keeping tenants, attracting new renters when properties become available and minimizing the amount of time between move-out and move-in.

Revenues also come from collecting late fees and enforcing lease contracts.

Minimize Costs

Costs are impacted by tenant turnover, repairs, ongoing property maintenance and tenant delinquencies and/or evictions. Turnover costs (the cost to get a house rent-ready) are significant, even when the tenants are clean and take care of the property.

Repairs paid by property owners can be kept down through good lease contracts and proper tenant screening. Ongoing property maintenance is unavoidable and strong relationships with service providers keeps costs down.

Obviously keeping delinquencies and evictions to a minimum and preventing these costs is best, controlling the costs when needed is critical.

Information Systems

When using a property manager, you should have access to all of the information that pertains to each property you own: property ownership documents, tenant lease information, revenue owed and collected, and costs. Reports can be scheduled to be sent automatically by e-mail. They can also be generated on an “as needed” basis.

If you are managing the properties yourself, the need is the same- you need to know if you are making or losing money on each property.

What about your properties? Any "tricks of the trade" that you can share?

Real Estate is for Patient People

Peter Fortunato, a renown national real estate investor and trainer, teaches that investing is "a thinking man's game, not a running man's." As I thought of that statement it occurred to me that patience is needed as well. Here are some examples:

Looking for Diamonds

A real estate investor who specializes in fixing and flipping real estate is looking for a diamond in the rough, that is REAL diamond, not a fake. Robert Allen, the author of "Nothing Down", talks about how difficult it is to the untrained eye to find one diamond in a group of cubic zirconium. However, he can teach how to spot the diamond with one simple trick: Turn the stones upside down onto its face. Then the difference between the stones becomes obvious and the real diamond reveals itself.

In real estate there are a lot of properties that report themselves to be diamonds, but only you can make that determination. Does the property meet YOUR requirements to make a profit? You may need to go through dozens of offers before finding the diamond and deciding to execute the transaction.

Once you do purchase the property it typically takes 3-6 months to fix, resell, and get paid. How many people working for a paycheck a willing to wait 3 months to get paid?

The 30 Year Bamboo

Another way to invest is to buy and hold real estate. In that case, even more patience is needed. This is a lot like a species of bamboo that lives along the shore of the Bay of Bengal. It blossoms once every 30-35 years! Think about owning real estate by paying down a 30 year mortgage. You may have cash flow along the way, along with depreciation benefits to reduce your taxes. This is truly a get rich slowly scheme that requires time.

Why Proceed with Patience?

There are millions of people in the United States that are running away from investment real estate right now. They got involved at the top of the market and have lost a lot. Many were looking to get rich quick, did not examine the risks, look at downstream consequences, or did not educate themselves.

The most successful investors I work with have 1-3 transactions at a time and always finish what they start. There are a lot of details that need to be taken care of, a lot to learn, and a lot to do. The successful investors identify what they want and then patiently proceed to get it.

Be Prepared

Once you know that you have found what you are looking for, you need to respond quickly. There are a lot of people looking for the diamonds. Are you ready to:

• Write offers the day a property goes on the market?
• Close quickly- 1-2 weeks, better yet in 1-2 days
• Have professional resources that can help you structure and fund a deal?
• Deal with the property AFTER you acquire it? Fix up, rent it, sell it, etc.?

Work with a Partner

One recommendation that I always have, especially to beginning real estate investors, is to try working with a professional real estate investor who has experience doing what you are trying to do. This lowers your risk tremendously and you can learn how to work on your own by participating and gaining experience over time.

Are you a patient person? Have you always been? Can you think of someone who has rushed into real estate and been burned?

Book Review- "Blog Schmog"

Check out this book review. How does it relate to real estate? A lot of people are using social networking and the internet to market their real estate business. This book will give great insite to what you can get out of a blog. CLICK HERE TO READ REVIEW