The majority of people investing in real estate for the first time are going to fail. It sounds harsh, but it is the unadorned truth about property investing. Most new property investors fail within their first few years of investing. Of those that survive beyond the fifth year, only a few proceed to make it big.
What is the main reason most new property investors fail?
The straightforward answer is that most new investors need to learn that the most important quality they need to succeed as property investors is time. They think that being able to raise the money to buy an investment property automatically qualifies them for success as a property investor. But they are wrong.
Real estate investment success only happens after some time; it takes time. Most of this time is spent understanding the basic strategies for real estate investment success and also learning to master those strategies. Many new investors need help learning these lessons before they mess up their first investment.
The proven way to do this is for new property investors to surround themselves with people who have successfully done what they are trying to do. These experts should include an experienced mentor, lawyer, local real estate agent, mortgage broker, contractors, professional handyman, accountant, and…
… of course, a property manager.
A reputable property manager is essential to any investor’s success when buying their first residential investment property. Property managers are crucial because they are at the forefront of managing the day-to-day operations of a property.
Consequently, they can shield the investor from mistakes derailing other new investors’ investment efforts. By looking over the shoulders of a competent property manager, new property investors are spared the expensive ordeal of learning by trial and error.
Property managers help new property investors navigate the most dangerous pitfalls on the investor’s road to investment success. Hiring a property manager will help you succeed with your first residential investment property in six ways.
Why you need a property manager for your first investment property
1. Property managers create systems
Tenant retention and vacancy rates are two of the most important numbers to watch in an investment property. Property managers know this and can maximize vacancy rates through their robust systems. Their systems and processes ensure prompt payment of the rent by tenants, and they minimize conflicts by limiting contact between renters and the owner.
2. Avoiding problem tenants
Cash flow problems can lead to investment property failure. If tenants fail to pay their rent on time or don’t pay the rent at all, the investor will not have the cash they need to run their property. Property managers help investors avoid these problems by eliminating potential problem tenants through time-tested tenant-screening methods.
3. Cutting maintenance costs
Another major factor in the success or failure of an investment property is maintenance. The cost of keeping the building’s structures and systems in good condition can wipe out your profits. Delays in responding to tenants’ complaints will affect your relationship with tenants. Experienced property managers know how to keep a building running efficiently while saving money.
4. Navigating tax issues
Property managers, by experience, know the tax loopholes to exploit to boost profits. These loopholes allow real estate investors to make deductions on various expenses on their property. New investors quickly get into trouble with the law because they handle the investment property’s taxes. On the other hand, property managers provide the needed guidance to help investors get the most out of these tax deductions.
5. Avoiding regulatory difficulties
Landlord-tenant relationships are one of the most regulated aspects of rental property investing. New investors regularly make decisions that leave them with thousands of dollars in fines and penalties. These regulatory infractions can disrupt the operations of a rental property or even make the investment unprofitable. An experienced property manager can provide invaluable guidance in this area.
6. Prevent personal liabilities
Due to the litigious nature of society, people are always looking for someone to sue. The tenants in your rental and random visitors to your property can seize upon the smallest excuses to file a lawsuit. Even if these lawsuits don’t take money out of your pocket, they can stress and distract your mind. Hiring a property manager helps to limit your liability and exposure to lawsuits.
How much will these services cost you?
The best thing about hiring a property manager is it is a tax-deductible expense. Even if it is not, a property manager’s fees should not be counted as a cost. It should be viewed as an investment because the contributions of a good property manager will help you make more money on your residential property.
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