August 25, 2019 - by Erik Carrier
Property Management for Real Estate Investors
A savvy real estate investor’s guide to property management
Are you looking at real estate as an investment opportunity? If so, you better have a terrific team in place throughout the experience – from property renovation to tenant retention – if you plan on turning a profit.
Who do you trust for this major responsibility? Hopefully, the answer is simple – a property management company (but not just anyone of course).
Property managers play an important role in the success of any real estate investing initiative. Without employing a highly qualified property management company, real estate investors could lose their proverbial shirt – wasting valuable resources (time and money) and lengthening the time to profitability for the properties they purchase.
Knowing what to ask a property management company will ensure you’re on the right track, providing the much needed insights necessary to select a team that can meet your expectations and serve you and your future tenants accordingly.
We’re profiling just some of the many responsibilities and obligations of a qualified property management company in Chicago so you’ll know, when the time’s right, where to turn and what to ask.
It’s not easy to be a property manager and a great deal is at stake if you turn over the oversight of an investment property to someone without the required qualifications.
One of the most important, depending on the state of course, is the official license to operate. In the state of Illinois for example, property management is considered a real estate activity so requires a real estate license in order to operate.
Insurance is another “qualification” that any property management company should also have – because if they don’t, the real estate investor will be responsible for any issues that arise (which can quickly become very, very expensive if properties are managed poorly and put people in danger).
Industry knowledge and familiarity with all of the required skills is also of paramount importance.
A qualified property manager will have different types of experience including managing properties that they own and selling/leasing/renting the properties of others (not to mention their experience with renovation and general improvements).
An experienced property management company should also be familiar with a variety of real estate processes, and the many challenges and opportunities that come with different neighborhoods and property types that are under their control.
Contracts & Costs
For many real estate investors the single most important benefit of contracting with a property management company is that they can save real estate investors from overspending on general operations. That’s a major advantage as it enables these investors to focus solely on the financial aspects of their business such as identifying new properties to acquire.
Property management companies often have very different approaches to their cost structures and contacts, of course, so real estate investors should make time to understand what is included with their monthly management fee and any associated or separate or additional fees for things like evictions, tenant requests or managing rental payments.
Most new to real estate investing are unaware of these fees (if they exist) and the associated responsibilities and quickly find these add-ons can limit their income if they are not careful.
If you’re going to turn a profit from your real estate investments (and that is the goal), it is critical that you as an owner, and your tenants, are on the same page. That means that communication needs to be a top priority and many property management companies have the skills, experience and systems in place to make the most of each and every opportunity presented to engage with tenants.
Ensuring that your real estate investment is properly maintained is one of the core reasons that real estate investors turn to property management companies.
Failing to maintain investment properties reduces the worth of those assets, so property managers must, in an ongoing manner, continually make necessary and required improvements – from changing light bulbs and cleaning carpets, to replacing water heaters and roofs. Not all property management companies do the same thing so check that contract and make sure that you’re covered for all sorts of fixes.
Marketing & General Management
Property management companies should also be able to express how they will get your property in front of potential renters, be able to succinctly explain how prices are calculated and have a process in place for determining when to raise or lower rents.
There is a lot involved with successfully managing a real estate investment. Choosing a better property management company that has the skills and experience necessary is critical to your success and ability to turn a profit? Looking for a project management company for your investment property? Learn more about Red Star, one of the top property management companies in Chicago, and schedule a consultation today.