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Anyone who says real estate is a purely passive investment has clearly never tried to operate a rental property. Property owners have a whole range of concerns that must be addressed when operating a property: marketing your property and finding new tenants, collecting rent from existing ones, maintaining your property to protect your investment, and more. As you grow your portfolio, management can easily become a full-time job, costing you a lot of time and effort.
Luckily, you don’t need to do it alone, and there are many good reasons why some of the most successful investors don’t. A property management company can help to take care of all of the little things that a property requires. With their professional skill set, your property management team will not just manage but excel at keeping your property in great shape, which can mean good things for your overall return on investment.
To find out more about why investors need to consider property management, we spoke to Ben Ghebrezghi, General Manager at Marco Property Management. Marco has been a leading property management company for over 20 years in the GTA, specializing in the luxury home space. Over such a long time, their expert team has refined the skills to succeed in property management where many owners falter.
Here are 5 important reasons why you need to consider property management if you haven’t already.
Before you consider value from things like cash flow, you need to recognize that a huge bulk of the value of your property exists simply in the physical property itself. For this reason, maintaining your property in good condition is crucial to getting your investment success.
Maintenance can be a tough job for an individual owner. Outside of the work of undergoing repairs, or hiring someone reliable who will do it for you, you need to be able to identify the need for maintenance in the first place. Oftentimes if you aren’t present the way a property manager is you can miss important maintenance needs that can cause serious damages down the line. And, when a problem is recognized, you may not be able to be there, hands-on, as soon as the problem requires.
A property management company knows how to recognize maintenance issues and how to solve them as efficiently as possible, helping you to keep your property in the best possible condition and retain its value.
Ghebrezghi says that owners don’t often have the expertise to see problems coming, and even one-time mistakes can be incredibly costly to the value of your home.
“It's important that you keep what could be your most expensive asset in good condition. When your body is ill, you want to go to a doctor because they’re an expert, and you should think of a property manager in the same way.”
“There's tons of value in making sure that you take care of your home because even little things can end up becoming big things if they aren’t taken care of. If you don't address things properly, it just gets worse: a water leak can turn into a whole house full of mold. Unfortunately, a lot of times owners don't have the experience to see something coming the way we do, and things can really add up.”
A rental without a tenant means you are simply missing out on potential income. The longer your property remains untenanted, the more you miss out. A property management company can help here too.
For one, they can handle the entire process of finding, evaluating, and ultimately signing on tenants to live in your property. This alone is a major area where investors lose themselves money to inefficiency.
According to Ghebrezghi, “there are costs usually associated with getting new tenants that can be avoided by using a property manager”.
More important than just having any tenant is having the right tenant. A property manager can help you to find the right tenant in a few ways. A good manager has a deep understanding of your property, what it offers, and the kinds of people who are a good fit as tenants. This can help them in marketing your property to the right people, and in vetting potential tenants to find the best of the best.
The value of having a full property with good reliable tenants can not be understated, says Ghebrezghi, and having the wrong tenants can end up causing a lot of trouble for investors.
“Having a tenant who is cooperative is very helpful in many ways. They’re more likely to pay rent on time and keep the place in better condition. A disgruntled tenant tends to care less about the premises at times, especially if you have a combative relationship and that’s definitely something which you want to always avoid.”
So you’ve got some tenants but the work doesn’t end there. Part of being a landlord is keeping in communication with your tenants and their needs and concerns. You also need to be able to reliably collect rents on time, and correct issues if payments are missed. All of this can be handled with professionalism and grace by a management company, to save you headaches.
“Tenants will be more likely to want to live in a place that is properly managed because they'll know that they know the property well taken care of and they know that their issues will be addressed in a timely manner with professional service when something happens. Especially with rent rates as high as they are in a city like Toronto, you want to make sure that your landlord is there for you, and with a property manager, you can make sure they have a 24-hour line.”
Happy tenants are less likely to cause problems and more likely to stick around, meaning more reliable and steady cash flow for you.
There are also numerous laws that you will be subject to as a landlord, and it is incredibly important that you follow these to avoid potential trouble. A management company will be very familiar with landlord-tenant laws and will ensure everything is above board at your property. One area that Ghebrezghi highlights is rent increases, which are often not handled properly by landlords.
“One thing that I find that owners who try to manage their own property never do quite right is the rent increase. It’s a common mistake to not give yourself enough time because it must be done 90 days prior to taking effect, and there’s documentation that needs to be provided. If you want it to take effect next month, you won’t be able to get it done.”
One of the most important questions that investors have about property management is: How much is this going to cost me? Sure, the benefits sound nice, but how can I make money if a property manager's fees are cutting into my returns?
Naturally, a property manager is going to cost you money, usually a percentage of your rental income, but the value can well outweigh the costs.
Let’s look at what we’ve already covered:
These three facts alone provide a lot of value in savings and reliability of income for a property owner, but we can go even further.
In rental properties, especially in larger multi-family properties, the value of your property is closely tied to how well it operates as a rental. The great thing about a property management company is that they improve your property on a number of levels: on a physical level through maintenance, on a service level for tenants, and on a business level through management and marketing. The result is that a well-managed property can actually draw even more tenants and demand higher rents, which ultimately can raise the value and profitability of your property.
Overall, if you hire the right managers, their benefit to your property will easily make their services worth the money.
“I believe Property Management appeals to everybody, be they small-time or large investors,” said Ghebrezghi. “I think there's even an appeal for larger homes to having a property manager for your own home. Ultimately your home is an appreciating asset and taking proper care of it will be reflected in your property values. In that way, I think having a well-managed property pays for itself in the long run”
The final reason to get a property manager should resonate with anyone who has felt the stress of managing an active rental property. Simply put, there is a substantial value that can be placed on your own time and peace of mind.
For one, you are going to save the stress of always being on call for every little thing that can go wrong at a rental property. You also save all the time you would usually spend addressing and dealing with these issues, and you avoid the fatigue of a long day spent chasing solutions to problems. However, some may be anxious at leaving their property in someone else’s hands and want to make sure they are getting their money’s worth. Managers understand this, and will often provide a direct line of reporting to owners who want to check in on how things are running.
Ghebrezghi explains the steps the team at Marco takes to ensure transparency to property owners:
“We always maintain transparency with our owner partners. We use software tools to track and monitor property tasks as they come in from tenants. We can instantly share our progress with owners so they know things are being taken care of. If they need even more feedback, we are of course happy to provide that too.”
“I think transparency is of utmost importance, especially when a lot of owners are not always around. There are owners who may not even be in the country and they need to be sure that their investment is in good hands.”
The question is, what are you going to do with your newfound free time gained from hiring a property manager? If you are an ambitious investor interested in growth, you should recognize the value of more time to focus on expanding your portfolio and business. For those who plan on expanding their portfolio in rental properties, this is nearly only possible with a property management partner. So, not only can they help you make steady returns, but they help you be unshackled from your property, so you can confidently take those returns and put them to use elsewhere.
Property management is a wide topic that covers a whole range of different tasks and competencies. As an investor, your need for effective property management is high, but it may simply not be in your skillset or schedule to handle everything yourself. Rather than struggling to learn from your mistakes in management, working with a reliable property manager can save you time, and money, and allow you to grow even faster.
Our partner Marco property management provides property management services across the GTA, specializing in luxury rental properties. If you are interested in learning more, visit them online at marcotoronto.com or email them at [email protected]
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