Inflation calls for money-saving measures

As we all are facing high inflation and tougher economic times, looking for ways to cut costs remains top-of-mind. Many real estate investors are planning or have already pushed through rent increases on their tenancies. Others have delayed cosmetic improvements due to supply chain challenges and the likelihood of having to lose income during a remodel vacancy. And others are directing utilities to be the tenant’s responsibility to reduce outgoing costs.

These efficiencies are helpful for stabilizing cash flow, however, some would argue that hiring a property manager is an unnecessary cost that should be insourced to save money, almost to the point where owners are releasing their property managers to self-manage their properties. If you have a manager, depending on the cost-to-income ratio and how well (or not so well) they are managing your property, this could be a wise decision in the short term. However, if you are self-managing and think a property manager will be a cost that outweighs the benefits, think again.

Let’s take a look at the value of having the right property manager and what you need to do to find the right one, whether you’re a first-time property manager seeker or have a manager that may not be performing for you. The savings may surprise you.

Professional guidance will help you avoid risk and hassles

As an investor, you will certainly benefit from professional, experienced guidance if your goal is to achieve passive income from your rental properties. Property management will help your finances grow and reduce the risks associated with ownership. You should be able to see your expenses fall in line and your income grow, even in tough economic times.

If you have property management services now and are losing money or perhaps you are self-managing and your building has not reached its full income potential, you need a manager to bring their expertise to your entire portfolio as they will most likely discover gaps and help you maximize opportunities for increased savings and cash flow.

The benefits outweigh the costs

• Your time is priceless. Owning and managing your own investment property is a full-time job. If you are already working forty-plus hours a week, you probably don’t have time to maintain your property or address tenant concerns in a timely manner. Time is money. Being able to attend to tenant needs as quickly as they come up and completing maintenance items is critical to keeping tenants happy and renewing leases versus looking for a cheaper place to live. How much is your time worth?

• Avoid contractor/vendor struggles and potential risks. Having relationships with vendors for emergency maintenance or knowing the ins and outs of each municipality’s requirements is a skillset that a great property manager brings to the table. You may not have all the connections needed to manage your property smoothly or have the skills to negotiate or know when a contractor is taking advantage of you. The right relationships are key to successfully managing investment properties. Being able to keep costs down, address issues in a timely fashion and get the support you need when you need it drives savings right to your bottom line.

• Grow your cash flow faster. If you are trying to manage a property on your own and your cash flow is not growing, it may be time to turn to the experts. A great property management company should be helping you increase your financial gains. Having the right team on your side will help you determine market rates and if you should raise rents to get the most out of your property, especially when rentals are becoming more and more competitive due to tenants shopping around for more affordable places to live. A manager will help you decide if your property needs improvements and what improvements to make so you can avoid over-improving or under-improving your property. The right property management company has efficiencies built into their processes to help you turn over vacant units quickly, lease units faster and expedite rent collection and tenant retention.

Choices to make once you decide to hire a new manager

• Choose how involved you want to be—Every property management company will have their own level of involvement. Be sure you understand what they will handle and won’t handle as a part of their services. If passive income is what you desire, you want to look for full-service options. If you want to be more hands-on, a company that handles specific tasks may be best. Most companies will facilitate the day-to-day management duties such as leasing, minor maintenance requests, collecting rent, etc. Keep in mind that this type of service still requires a lot of your attention. You are responsible for watching the financial health of your property. If you are interested in passive income, you need a property management team that can think for you; a team that understands the financial side of your investments and builds services around the goals you have for income. A full-service property management company will gather details about issues and present you with options. They will look for cost-effective solutions for anything that arises and handle everything for you. When looking for the right partner, make sure you know exactly what you need and expect so that you can choose the right team and how involved you want to be in the management of your property.

• Choose the communication style you prefer—Do you want to be notified every time something happens or do you want a property management company that can make decisions on your behalf? Let’s say a tenant has a simple issue with a light fixture or a leaky faucet. Do you want a company that will call and ask what they should do for every situation or do you want a team who recognizes a problem needs to be fixed in a cost effective manner and is empowered to take care of it for you? Your communication style matters, so make sure it works well with your property manager.

• Choose the right business partner for you—Your property manager should understand your style, preferences and income goals. The should guide you and provide the tools to know when to sell, when to buy, when to consider a 1031 exchange and how to maximize cash flow as well as any other goals you have for your income. There are many versions of property management—find the one that fits well with your goals and the time you intend to invest in the success of your property.

Focus on the right things—not just the bottom line

If the first question you ask a potential property manager is how much they charge, your focus is on the wrong thing. The right property manager will make you money, even in the worst economy. Now more than ever during these uncertain times, you need to call on the experts to help you find hidden opportunities to increase the value and cash flow of what’s in your portfolio.

The best time to hire the right property manager is during acquisition, not after you own a property to avoid making a bad investment. However, if you want to explore the value of what a good property manager can bring to your current portfolio whether you’re just tired of self-managing or you want to see where you can improve cash flow on the property you have, the time is now.

We are happy to look at your properties to see whether you would benefit from a manager or to assess your current management company. Simply schedule a consult with our team and we’ll get you on the right track with making the best property manager hiring (or firing) decision.