An investment property is a more active source of income than many people think. An investment property must be well managed to fulfill its potential for building wealth. Most new investors don’t realize this until they buy their first investment property.
As the Blanket Homes team says, managing an investment property requires much time.
Keeping the building in good physical condition, finding and screening tenants, making sure the tenants respect the lease terms, collecting the rent on time, and handling maintenance requests are just a few of the things you need to do to keep a property running smoothly.
Doing these things takes as much time as a 9-to-5 job. New investors often think they can manage their property alongside their day job or business. They soon learn that this doesn’t work as the job or business suffers, or they neglect the upkeep of their property.
That is why you should devise a plan for managing the asset before considering buying your first investment property. Your property management strategy is the secret sauce that unlocks the hidden promise of your investment property as a source of income.
Refrain from spending all your energy thinking of how to buy a property only to have that effort destroyed by your failure to manage the property efficiently. What are your options for managing an investment property, and what are their pros and cons?
How to manage an investment property
There are only two ways to manage an investment property:
- You can manage the property by yourself
- You can hire a professional property manager to manage the investment
Below, we’d like to look at the reasons to choose one of these options over the other.
Pros and cons of a self-managed investment property
Pros
There are two reasons why an investor may want to manage their investment property by themselves.
1. Helps you gain experience
Self-managing your first property will give you experience. There is no better way to learn the ropes of property investing than by handling the daily activities of a property.
2. Saves you money
In your early days as an investor, when you are cash-strapped, it might make sense to manage your property by yourself. But note that those savings can be wiped out by more extensive costs elsewhere.
Cons
1. Not passive
Managing the asset by yourself will be investing in an active versus passive source of income. The demands on your time can make it hard to find time for other things.
2. Limit your growth
You need to be more expansive in the number of properties you can effectively manage yourself. That is true even if you are a highly organized and resourceful person.
3. Make avoidable mistakes
Investment properties are highly regulated. As a new and inexperienced investor, it is easy to make mistakes that may lead to problems with the authorities or tenants.
4. You have higher costs
You will pay more to get lower-quality handymen and contractors because the best workmen only want to work with property managers who can guarantee constant work.
Pros and cons of hiring a property manager
Pros
1. Expand your portfolio
It is easier to grow your real estate portfolio with a property manager. Your ability to expand is separate from how much time or energy you have.
2. Passive income
By giving you the gift of time freedom, professional property management unlocks the potential of your investment as a source of passive income.
3. Remove geographical limitations
When you hire a property manager, you don’t have to limit yourself to buying properties within your location. You can take advantage of other profitable markets.
4. Access advanced tools and expertise
Property managers give you access to many advanced tools and the accumulated know-how of different experts. You grow faster under their guidance.
5. Boost profits
A property manager knows how to keep costs low, collect the rent on time, and avoid problem tenants while respecting the lease terms.
6. Minimize tenant turnover
Property managers improve the performance of your assets by minimizing tenant turnover. They know how to retain the best tenants and find new ones quickly.
Cons
1. Costs money
The only thing you lose when you hire a property manager is money (the property manager’s fees). But the property manager will more than make up for this by helping you make more money and improving the value of your property.
Conclusion
Should you hire a property manager for your investment property, or should you manage it by yourself? There is no right and wrong answer; it depends on how far you want to go on your real estate investment journey.
You should self-manage your investments if you plan to buy just a few properties. But if you want to build an extensive portfolio of real estate investments with properties spread across different geographies, you should hire a professional property manager.
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