Is property management a good investment? Property management is a very good investment because it maximizes renter occupancy and profits while minimizing turnover and costs. It also gives landlords and...
Property management is a very good investment because it maximizes renter occupancy and profits while minimizing turnover and costs. It also gives landlords and real estate investors the security and peace of mind of knowing that their properties are being taken care of. Many people who hire property managers usually end up saving so much time and money that the fees that they paid the property management company ended up paying for itself. Gary Knippa, a property management company owner in Austin, TX says that "[Property management is] very cost effective. The small amount you pay per month for a management fee will save an owner a lot of time and trouble and emotional stress. One half of all the houses anywhere are owned by investors. That is one of the best-kept secrets out there."
Many who are interest in investing in real estate or becoming a landlord let the overwhelming task of manage the property scare them out of it, but if you have a good company helping you, the rewards far outweigh the risks. By owning investment property, can increase the value of your investment simply by making renovations, subdividing or raising rents. You can also leverage your profits, receive several tax shelters and benefits as well as get a very good stream of cash flow come in every month.
One of the most common questions that curious prospects ask is how to get started. Knippa advises people to "First...find a property. The big challenge is to find the right deal, to find that truly makes sense from an investment point of view, something with cash flow. "You also want to make sure that you can get financing, so make sure you speak with an agent or mortgage broker to get the approval process going. Once that is taken care of, you will be in a much better position to negotiate with a seller. Make sure that you look at a lot of properties and get familiar with the neighborhood that you are thinking about investing in. You also want to make sure that you are only dealing with "motivated" sellers. A motivated seller is someone who is very eager to sell you his or her property, and will make concessions including lowering the asking price in order to get the property sold. There may be many reasons why a person wants to sell their house right away; they may be going through a divorce, received a job offer in another state or they might be having financial problems and need the cash. Regardless of the reason, buying from a motivated seller usually results in the buyer being able to purchase a property at a very good price.
It is also important to try to make a profit off the transaction. If that is not possible, you should at least have an idea of what you can do to add value to you property in the short term in order to maximize cash flow. Knippa notices that "A lot of investors are buying property that is not based upon any cash flow right now, but they are basing it on the anticipation of increased property value and the hopes the rents will go up." This is a risky move for a novice investor, so it is usually in your best interest to focus on properties that have cash flow potential in the near future.
