The conundrum of investment properties
Investors looking for diversification have often turned to a rental property or a collection of rental properties to balance and spread risk in their investment portfolios. As with any investment, people need to consider all the issues, problems, and pitfalls along with the potential benefits. Unfortunately, many investors are unaware of potential issues and do not take the time to investigate these issues before closing escrow. A property management course and a basic real estate investing course would be great investments of time for someone considering rental properties as a source of investment income and a long-term investment. Some of the issues and concerns are discussed below.
Inexperienced brokers and uneducated investors make a deadly concoction
Rental property investors often use the services of an inexperienced real estate agent who does not fully understand rental properties, who does not fully understand return on investment, and who does not fully understand what cap rates are. Most of the time, these investors simply turn to their friend ‘the real estate agent’ or use whatever real estate agent they are familiar with or feel comfortable with to buy these types of properties, sad as that may sound.
The fact is, most real estate agents aren’t smart enough to understand rental properties, cap rates, return on cash, return on investment, leveraged investing, and common terms associated with properties. investment. Compounding this fact, most investors are equally inexperienced initially and lack the proper experience to locate and purchase a high yield investment property. No one needs to look any further than this question: Why would a homeowner sell a high-yield investment property? That question should be the first of many asked by both the broker and the investor. One problem is that some investors are so excited to get into a property that they look beyond the truth and numbers and just want to gain control of the property. This is often a flawed approach because most agents will be hesitant to stop the enthusiastic buyer for fear of missing out on a nice commission.
The property management profession is an equalizer
After an investor has closed escrow, if the inexperienced agent has not offered to ‘manage’ the property for them, many of them decide to manage the property themselves (only licensed real estate brokers can manage properties rental). When these unsuspecting homeowners are faced with the intricacies of Fair Housing laws, Equal Opportunity issues, civil rights issues, anti-discrimination issues, bad tenant selection issues, default notice issues, eviction issues, and, finally, collection issues, many times they turn to a professional property manager or property management company to help salvage their sinking ship.
If bailed out in time, a professional property manager can turn an investment property around and help the investor’s decision pay dividends. With a competent property manager, the return on investment can be realized and the owner can have time to enjoy the investment, not get excited or worry about it. The property management company will take care of investment, maintenance, tenants, and all matters related to the property.
Property Management Education Course
Educating both inexperienced real estate agents and first-time investment property owners about prudent property management is critical to maximizing an investor’s return on investment. It is rare for an owner to successfully manage his or her property or properties and obtain the maximum possible return in that particular market. The reason it’s weird is because the typical owner-manager isn’t using the latest and greatest property management techniques, software, screening procedures, and most importantly, not keeping up with the changing property laws. owners and tenants. Every January, several laws are enacted that favor tenants and debtors and that most people don’t know about. When a new law goes into effect, it’s another potential trap for the lone ranger owner to violate and end up on the wrong side of the lawsuit.
The surefire way to avoid this potential problem is to hire a property management company to manage and protect the owner’s investment, and more importantly, maximize the return on investment. Another way around this problem is to have every landlord take a property management course and learn the profession from scratch without going through the heavy blows of experiencing tenant issues firsthand.
Finally, an owner could hire a property management company that, in addition to all the typical staff, also has a real estate attorney on staff who can sort out and answer all the legal questions that seemingly end up front and center. This would be a truly educated and easy decision for the owner to make.