Property Management for Beginners
If you’re considering investing in real estate, then you’re on the right track. Most millionaires agree that real estate is still the best investment to start today, and for many reasons.
Well, everybody needs a place to live, but if you don’t want to be around to handle calls every day, then we understand. That’s why so many landlords choose to outsource all the work to property managers so they can sit back and watch the rent checks come in. If that sounds appealing to you, then let’s talk about property management for beginners!
How Does Property Management Work?
Landlords are busy, and many of them have full-time jobs or too many properties to manage. Other times, landlords move to another area, travel, or choose to retire. In many cases, they just want passive income.
Regardless of their situation, they can’t always be available to handle issues with their properties at a moment’s notice. For that reason, many choose to hire property managers.
For a small portion of rental income (usually 10% or less), property managers essentially do all of the work. You can use a rental property calculator to see how this works in your favor.
That price includes rent collection, tenant screening, and more. One of the most common questions is, “If they only take such a small percentage of the rent, how do they make money?”
Well, that’s a fair question, as it almost sounds too good to be true. However, property managers and property management companies do this full-time and can handle multiple properties at once. They may also have alternative revenue streams such as coin-op laundry services, payment processing fees, or others.
Either way, that revenue comes from the tenants, and the owner can still set whatever policies they are comfortable with. This is a win-win for the owner, as they won’t have to sacrifice much income from their investment properties, and they can still be entirely hands-off. That’s how the economics work in a nutshell.
Benefits of Property Management
The first and most obvious benefit of property management services is that you can earn an entirely passive income. You won’t be tied down to one specific location, and you won’t have to worry about handling 3am calls about a broken sink. However, that’s not the only benefit.
Potential Earnings
We’ve established that property managers will take a small portion of your rent. However, you may be better off for it.
In many cases, property managers can increase your overall revenue and profitability. They’ll be able to find you the right tenants, save money on repairs and maintenance costs, and help you set the most advantageous rent prices. They have as much of an interest in increasing your earnings as you do!
As a result, you’re bound to spend less on routine services, repairing damage to your building, evicting bad tenants, and more. This can directly save you money over the long haul, often more than you spend on property management.
Security
Securing your investment is likely your first priority. While real estate is considered one of the safest investments around, that doesn’t mean it’s entirely safe. There are three main concerns that can harm a real estate investment: the property, the neighborhood, and the tenants.
When you buy the property, you’re going to get it inspected, and hopefully buy in an up-and-coming or stable neighborhood. However, tenants come and go.
A property manager will be able to help secure your investment by adjusting rent prices for inflation and market trends, appropriately screening tenants, and monitoring the overall security of your property. Having these services from an expert property management group can keep your investment safe for the long haul.
Peace of Mind
Expert services will only be a call away. That means that you can rest assured that your property is being managed and that you’ll hear from trusted professionals if any concerns arise. Also, you’ll have one point of contact for all of your questions related to your property, so you won’t have anything to worry about!
Property Management for Beginners
Now that you understand the importance of property management services, you see why so many landlords choose to go in this direction. So, what exactly do property managers offer? Let’s talk about that.
Rent Setting & Collection
Again, when you hire a property manager, you are still the owner. You can still override any policy changes, but property managers will help you set fair rent prices to maximize your earnings.
Once complete, they’ll also be able to collect rent for you, and you’ll just get to sit back and enjoy the checks. Most managers will offer an online payment portal or collect physical checks and send the majority directly to you.
Marketing
One of the biggest time-consuming tasks for landlords is when they need to fill a vacancy. They may need to repaint the unit, make repairs, market the unit, handle showings, and conduct tenant screenings. Well, property managers handle all of that, and they have the marketing tools readily available already.
Tenant Screening
Tenant screening is critical to the security of your investment. While you can’t control human behavior, you can try to find the right tenants for your property.
The right San Diego property management group will screen tenants based on their rental histories, credit, income, and criminal background. This is the best way to ensure the long-term success of your investment.
Remember, one bad tenant can ruin your profits for an entire year. If you speak to other landlords or property managers, you’ll hear stories of nightmare tenants that caused thousands of dollars worth of damage or refused to move out after not paying rent.
This is especially a concern with the eviction moratoriums in place, which are hurting small landlords around the country. The only solution to this is prevention, so ensure that your property manager has a thorough vetting process.
Tenant Relations
You won’t have to handle any communication with tenants, as they won’t even have your contact information. The property manager will be the primary point of contact for all tenants, and you won’t have to answer any middle-of-the-night phone calls. Also, property managers will handle policy enforcement based on the policies you set for your buildings!
Maintenance & Repairs
Maintenance is a major time-consumer in the industry. Mowing lawns, landscaping, and more have to be done every week or two, and repairs can come out of nowhere. Property management companies will handle this.
A lot of the basic work they can handle themselves, or they have staff to do so. Whatever they can’t do themselves, they’ll have a trusted contact ready to go at a moment’s notice.
Budget Handling
As we said, property managers will help you maximize profitability. They understand that you’re trying to make a profit with your investment, and they’ll do everything they can to help make that a reality. This includes maintenance, repairs, and all other expenses that arise in the industry.
How to Choose a Property Management Company
When choosing property management services, there are some things to keep an eye out for. Here’s how to choose the right services for your needs.
Check Their Services
Not all property managers are the same. Some may only handle multi-family homes or commercial real estate, and some may not offer all of the services you need. Always double-check to ensure they offer the services mentioned above if you want to earn a fully passive income.
Ask for References
Online reviews can help you understand the quality of services, but they aren’t always reliable. Asking for references will allow you to ask whatever questions you want to know about, which will ensure you’re finding the quality you need based on your values.
Talk Price
Lastly, ask about the pricing. As we mentioned, 10% is around the industry standard, and some go lower. However, it may make more sense to pay more for full services, especially if you want to earn an entirely passive income.
If you take a look at our pricing, you’ll see that we only charge 8% of rent for all of the services we’ve mentioned. Either way, shop around for the best price and services, and if you find the right ones within your budget, then get started right away!
Maximize Your Profits Today
Now that you understand property management for beginners, you see why it’s such a popular option for landlords around the country. The San Diego real estate market is booming, so get the most out of your investment and hire a property manager today!
Stay up to date with our latest real estate news and feel free to contact us with any questions or for help with your property!