Have you ever visited Venice?
It's a beautiful city by foot but that's no way to travel through Venice! No trip to Venice would be complete without a gondola ride. And that's just what Deena and I did when were in Venice.
It's relaxing, romantic, and there is so much beautiful architecture all around. It's a moment in my mind that I relive over and over. Picturing that relaxing, enjoyable scene, can you imagine how crazy it would be to destroy that experience with the following telephone call:
The DM (answering the cell phone): "Hello?"
Tenant: "Hi DM. It's Bill from your 123 Main Street property. I've got a problem... the toilet tank is leaking. I need you to come over right away to fix it."
Can you imagine relaxing in a gondola in Venice and getting a call like that?
The "money-saving" EXPENSIVE mistake that many new real estate investors make
Many first time real estate investors review their costs and make the mistake of thinking that they can save money and time by taking care of their own property management and maintenance. But they don't realize just how costly this mistake really is.
True confession: This almost caused me to go bankrupt in the very beginning as I was trying to manage all my properties. I spent so much valuable time doing costly property management work myself and just about ended up bankrupt. It was a lesson I never forgot and from then on I decided to always use property managers.
New real estate investors look at the expense of a property manager, which might cost about $100/month (10% of gross rents collected) and think that they could save that money to increase their profit. But what they don't realize is: The cost of the property manager (in money AND in time and effort) is well worth the expense.
In the time it takes you to answer a call and fix your tenant's toilet, or in the time it takes you to mow the lawn of a property you haven't wholesaled yet, you could be doing so many better, more profitable tasks...
- Building relationships with your list [link to previous blog post]
- Finding new deals
- Getting buyers to look at your existing deals
- ...Or floating through Venice in a gondola
For $100/month or 10% of the gross rents collected (the approximate cost of a property manager), you can spend the time making far more than that (or doing things that you enjoy... like floating in a gondola through Venice).
Many readers will disagree that property managers are a good investment... many will fight me on this but if you do you’ll never get to the level you could!
How to find a good property manager
Here are some tips to help you find a good property manager:
- Know the general location where you will be investing in properties. When you find a property manager in that area, contact them and start the discussion.
- Ask around for referrals. (In particular, ask your list of investors because some of them might already work with a trustworthy property manager). Or go to your local investors group and see who’s using who.
- Interview the property manager and ask them in detail what work they do and what they don't do. Ideally, you want a property manager who will take on all of your tasks so you are freed up to do more deals. Most property managers today will have a team to do the repairs and such. If they don’t I’d not use them.
- Get a contract so that expectations of both parties are laid out clearly. The property manager will usually have this. If they don’t have one, I’d not use them.
It doesn't matter if you want to focus on local real estate investing or become a world-traveling virtual real estate investor like me... a property manager is a must for your business and their "expense" will help you become more successful.
I look at it as not an expense but an investment... again many will fight this but if you do you’ll pay for it in the long haul... Trust me on this! Hire the BEST manager and enjoy the easy profits.
Your gondola-riding friend and mentor,
Mark Evans, DM, DN