Andrew Carnegie understood the power of owning real estate. In fact, according to Mr. Carnegie, “90% of all millionaires become so through owning real estate.” Whether you’re looking to become a millionaire or not, there are many benefits to owning rental properties. Investing in real estate provides an investor with long-term appreciation, tax benefits, wealth building, investment diversification, and passive income to name a few.
But with all good things, there are always risks. Real estate investing comes with its own risks: liability, inconvenience, and accounting are just a few of the risks and hurdles of owning rental properties. However, those hurdles can be overcome by hiring an experienced property manager. The role of the property manager is to protect your investment, make your life easier, and ensure producing income from the rental.
Liability of Owning Rental Properties
Every home comes with some level of inherent risk, and some homes have features that offer even more risk and potential liability. However, knowing what is a potential liability and how to mitigate and prevent those is essential. Property managers, especially those that are licensed Realtors, are experienced in identifying potential risks and can offer methods to reduce those risks. For example, if a homeowner opted to not hire a property manager and a repair was needed, the homeowner may decide to repair the issue himself. However, by doing the work yourself, you can increase your liability if the work wasn’t done correctly, wasn’t done up to code, or worse if a tenant died as a result of those repairs. Property managers can help mitigate such risk by hiring licensed and insured contractors to complete necessary repairs.
Property managers also provide added assistance by routinely inspecting the property to identify any issues prior to them occurring. It’s important to hire a property manager that is experienced and is working to not only protect your investment but to protect you as well.
Inconvenience of Owning Rental Properties
Ask any landlord or property manager when something goes wrong at a rental house, it always seems to occur in the middle of the night or on the weekends. Owning a rental property means that you are responsible for the leaking faucet, the clogged toilet, the malfunctioning AC unit, and every other major or minor issue. By hiring a property manager, you aren’t inconvenienced when those middle of the night weekend calls come in about a pipe burst. In fact, tenants call the property manager who arranges having any issues taken care of—and you aren’t inconvenienced in the process.
Depending on how you structure your lease agreements, you may also be responsible for lawn maintenance, routine seasonal maintenance and more on top of any tenant requested repairs. Again, the benefit of a property manager is to schedule and coordinate all repairs and maintenance. Without a property manager, you as the owner, are responsible for not only scheduling the maintenance but meeting each contractor at the property. You can avoid these hassles by simply hiring a property manager!
Rental Property Accounting
Keeping up with security deposits, rents, and expenses can be overwhelming, especially if you own multiple rental properties. Another benefit of hiring a property manager is having a detailed summary of your accounting each month. In some states, if you hire a licensed Realtor as a property manager, they are required by law to provide a monthly accounting of any funds received, spent, and dispersed to the owners. Come tax time, the owner has several ready monthly settlement statements to make filing taxes easier. Without a property manager, the task of balancing and accounting falls on the owner. The benefit of routine accounting by a property manager is to evaluate your financial investment. It’s important to check with a property manager prior to hiring them to see how often they will disperse funds and how often you can expect a settlement statement.
If you’ve considered owning rental properties, consider also hiring a property manager. Property managers work for the owner. They can be an owner’s best friend in maintaining a property, ensuring cash flow, and reducing risks…plus they assume the burden that comes with owning rental properties! If you hire a property manager that is also a licensed Realtor, you also have the added benefit of having someone keenly aware of the current real estate market and can advise you when is the best time to sell, increase rent, decrease rent, and more!