Rental property is still the best investment to make this year. Yet, there can be a HUGE difference between your expectations and hopes of what a new income property can deliver, and the reality of it.
Location & Value
We’ve all heard that real estate is all about “location, location, location.”
Location can make a significant difference in how your investments play out. Certainly in terms of holding value and occupancy rates.
Yet, real estate investors frequently confuse this saying for alluding to buying the most beautiful properties in the most prime locations.
Price versus value, and the returns that you are buying is another important factor. The goal is to lock in value and future income when you acquire, not to gamble on what could be down the road.
Opportunity Vs. Execution
Opportunity and actual results can be two completely different things.
You can make a good decision based on all the information you have, and acquire a property with a great opportunity for performance. One that is unlikely to go down in value, and which has a strong price to income multiple. Yet, the results you really get all come down to the execution.
The #1 Difference Maker
Projections mean nothing. The real outcome all comes down to how that opportunity is executed on.
The number one difference making factor here is property management.
The best rental property deals can be completely trashed with poor management. Whereas even mediocre properties and opportunities can outperform with great management.
Here are four ways this will make or break your investments…
Property Management & Contractors
Some argue that having great contractors will also make or break your investments. No remodel is going to get done or will be profitable without great contractors and contractor management.
Having strong relationships with the best local contractors and coordinating service, all rests on your property management company. Making them the most important factor.
Get the property management company right, the other will be taken care of.
Rent Collection
You are investing in rental properties to get rental income, right?
How much your properties rent for, how many days of the year they are rented, and how predictably and consistently that money comes in relies on your property management company.
Some are not structured to make their money on rent collection. In fact, they make more money just collecting applications on empty units and evictions. Neither of which helps you.
Make sure your property manager is incentivized to collect rent for you every month.
Accounting
Contrary to some social media and guru slogans, it’s not just all about the cash flow.
Yes, you do need cash flowing in from rents. Yet, the bottom line profit, and ensuring funds make it into your own bank account are even more important.
Pick a property management company that is professional in their accounting, is transparent about expenses and fee structures, and provides you 24/7 access to see what’s happening with your property and funds.
Preserving The Value Of Your Asset
Getting your property leased and rent coming in is just a part of what ends up equating to your real returns.
The other major part (in addition to taxes) is preserving the value of that asset, and how much it can eventually be sold for.
Imagine two landlords acquire identical neighboring homes, yielding the same amount of monthly rent. Yet, one tenant trashes the place, or fails to report critical roof or basement leaks. The other has a tenant that takes care of the place like their own home, and promptly reports concerns to a manager that is efficient with handling maintenance and repairs.
One property may end up being a money pit that will take tens of thousands of dollars to fix up again. The other will have added to the value of their property.
So, who’s managing your rental homes?