“Reasons for having a good property management company: 1. Quality of the tenant, 2. Fewer legal problems, 3. Shorter vacancy cycles, and 4. Better tenant retention.” – Jorge Vasquez
Why would you want to hire a property manager? Would the benefits outweigh the additional costs of having a property manager handle your assets? Are there other benefits that can help you as an investor in the long run? Today in our Graystone session, let us join Jorge Vasquez and Rafael Castro as they discuss the different reasons on how to increase your profits by hiring a good property management company.
Note – This article has been created based on the YouTube video titled “Increase Your Real Estate Profits Using a Property Management Company” by Rafael Castro and Jorge Vazquez.
Rafi: Welcome to another Graystone Session. Our topic today is something I am passionate about, which is Property Management. We will discuss several ways to increase your profits by hiring a property management company.
Rafi: You spend more, but you make more. But today, we will discuss four of those eight. And with that, what would be the first reason Jorge?
Jorge: The first reason is gaining a quality tenant. In order to achieve that you need to hire a professional property manager to ensure that the rents are paid on time, the lease is done correctly and enacts a plan of action. Furthermore, make sure your tenant is not doing anything illegal.
Rafi: Once you own rental properties, your highest expense and risk is a vacancy. By having a quality tenant, you minimize vacancy, maintenance, repair, and risk.
Jorge: Most of the investors that exited the investor market got burned by their property management. They divided their task and tried wearing two hats of being an investor and a property manager. When managing assets without professional help, this usually happens.
Rafi: Going back to our previous topic regarding the turnkey process, a property management company allows you to create that process. Because it is scalable, you can manage one property, but without a process, you won’t be able to handle more than ten to fifty.
Again, higher quality tenants from a property company because they can do background checks as well as have the benefit of that process. What is the second reason, Jorge?
Fewer Legal Problems
Jorge: The second reason is fewer legal problems. Having a property manager that knows the law and they can identify bad tenants, scammers, or those that want to take advantage of existing laws. They would be able to avoid most of if not all of these legal issues.
Rafi: This is where experience comes into play, from the moment you fill out the application, is the application asking the right questions? You need someone who possesses the expertise from application to eviction. It minimizes possible violations in legal matters, which could result in problems regarding eviction. A successful property management company will have a legal team to help you avoid all these risks. What would be the third reason to hire a property management company?
Jorge: Less vacancy.
Rafi: Again, Vacancy is one of the highest risks in terms of having a property. Having a property management company can shorten those vacancy cycles.
Jorge: The property manager must be responsive. Not being active is the number one reason why a tenant would leave you. If there is a situation or emergency, be receptive to it, and deal with it quickly.
Do the right thing.
Jorge: Make improvements to the property when they are needed. Put yourselves in their shoes.
Rafi: Back to vacancy, It’s about preventing stuff from happening. Not always reacting, start having conversations with the tenant, especially two months before the lease ends. Plan anything you need to change for a longer-term relationship with them. We had a situation before where a tenant lost her job. Because the property manager was in communication with her, we were able to make adjustments. This way you can give her some leeway at the same time start marketing the house, just in case she has to move, then we already have a tenant in place. From that perspective, the property management company will help you reduce vacancy.
Jorge: Another reason to maintain your vacancy is to have competitive rent prices. Make sure not to overprice or under-price your rent. You need a good property manager to tell you based on location, type of property, and amenities, how much you can rent the property.
It is also essential when selecting new property management that you research, find testimonials, and feedback they are working with before you decide.
Rafi: Absolutely! What would be the fourth reason for hiring a property management company that will increase your profits in the end? Spending to gain more.
Jorge: It is a summation of the last three reasons. By attending to your tenant, make sure that you have updates and repairs done, this leads to better tenant retention.
Rafi: A property management company can help with better tenant retention. Every time you have a new tenant, you need to pay for a new lease. There is potentially some vacancy along the way.
For example, in five years, you have two tenants versus five tenants. That is a 300% increase in your rate and is a tremendous impact in terms of investment. Unknowingly in terms of repairs, every time you get a new tenant, you have to turn that property, change carpets, maybe even a fresh coat of paint, and that leads to an increase in expenses. If you can lower that by having a two-three year tenant, that is two to three years of not doing these things, such as renew leases and dealing with unknowns.
Jorge: Absolutely, a bad tenant may be an issue. You can have up to twenty homes, and a bad tenant can still break you. It is essential to leave the management to the professionals.
Rafi: Again, from our previous video about the turnkey process, this will help you get that process. Once you have that property management piece with a company, starting from one to multiple properties, they should be able to manage it. As an investor, you can focus on acquiring more properties.
Jorge: Most investors that are starting have this misconception of buying a property next to their home. That is the worst mistake. The property manager takes the emotion away from the transaction. It also makes sure that you do not feel bad for a tenant. Everybody goes through different situations in life, but remember you are running a business. Very important to have that property manager.
Rafi: That’s it for today, but let me just run through briefly the last four items in increasing your profits with a property management company, which we will discuss in our next video.
- A Superior rent collection process
- Lower maintenance and repair costs
- Increase property value
- Personal benefit for the owner
Rafi: So stay tuned for more in our next Graystone Session.
Amazing tips from Jorge and Rafi. To Recap, the first four reasons are:
- Quality of the tenant.
- Fewer legal problems.
- Shorter vacancy cycles.
- Better tenant retention.
These would assist you in the long run, by making sure that you are invested and worry-free for the next few years, which helps you focus more on other matters such as investing in more areas. And always remember, a happy tenant equals to a happy investor and landlord.
If you want to know more about the additional four tips that Rafi hinted in the end, then stay tuned and visit us at homes4income.com for updates and questions.