Choosing the right investment property is only part of the equation when you’re trying to build your wealth.
Managing that property is the flip side of that coin and it really is a whole other ball game.
As a landlord, you will need to keep up-to-date on maintenance, financials and the real estate market in general.
You need to work with a property manager to get tenants and keep tenants, and you need to know how much to charge in rent (and when to increase it) so that you minimise vacancies and keep your portfolio progressing forward.
In order to leverage the earning potential and capital growth of your investment portfolio, you can’t simply be a landlord that sets and forgets.
Instead, you need to treat your properties like a small business and stay on top of four key categories:
1. Your relationship with your property manager
A property manager acts as an intermediary between you and your tenants so it makes sense that the better your property manager, the more secure your investment will be.
A good property manager won’t just collect rent – and a word of warning, they shouldn’t be chosen on management fees alone.
First and foremost, you need to choose a property manager that is proactive and works to protect your interests as a landlord.
Your property manager should provide regular reviews to advise you about rent increase and support their recommendations with up-to-date market knowledge and data.
It is important that you understand the risks and consequences as well as your rights in regards to rent increases, and this is where an experienced property manager can make all the difference, as they will facilitate the whole process.
2. Your relationship with your tenant
You may think that having a property manager means you won’t have to deal with the tenants living in your properties, but that’s not quite the case.
Keeping on good terms with your tenants can go a long way toward making the relationship more beneficial for you all.
It is not necessary to know your tenants on a personal level, but it is important to keep open lines of communication with them.
Tenants should be able to make reasonable requests to you through your property manager, in regards to maintenance and property upgrades and know that they will be considered fairly.
Keep in mind that your response to these requests will come back to influence any requests you make of them, so always be considerate, act in a timely manner and if possible, give tenants your reasoning if you opt to decline their request.
Tenants will find a rental increase a lot more palatable when they understand your motives and are treated with respect.
Even sharing some of your market research with your tenants could be helpful to justify your position, while also maintaining your tenants’ loyalty and helping them make the best decisions.
After all, you were likely a tenant once, so consider how would you want to be treated?
A final word of caution: you may feel that you hold all the cards in your hand right now, but vacancy rates are rising a little and if it’s a tenants market when the lease expires, you’ll be glad that you’ve looked after your tenants. It definitely pays to keep them on your side.
3. Your own strengths and weaknesses
I am a real estate investor and have been in this game for many years.
I own multiple properties and have probably acquired enough know-how to manage my own properties – but I don’t.
That is a job I leave to the professionals.
For me, it is well worth the management fee to leave the day-to-day running of each of my investment properties to a great property manager.
They are the ones who keep up-to-date with changing legislation and make the time to dot all the i’s and cross all the t’s, by following up on tenant references and insisting on an adequate contract and bond.
They are the ones with access to all of the market research for the particular area where my property is and they have access to the pool of tenants.
While you can manage your own investment properties, there is a lot more work involved than you may first expect.
If you don’t have a background in the industry and if being details-oriented, organised and flexible are not part of your personal skillset, then I would proceed as a DIY property manager with great caution
4. Your own education
As much as your property manager is your advocate, it is imperative to stay abreast of real estate trends as well as the specific market conditions in the location of each investment property.
In this way, you can fairly substantiate your decision to increase rent or deny a tenant request.
Of course, you also need to keep yourself educated about investing (do you subscribe to my daily market commentary?) and continue to refine your portfolio and your goals.
This means that you can take advice from your property manager and you can work to keep your tenants happy, but at the end of the day, you are the only one in a position to make the big decisions.
You are the only one who has the whole picture when it comes to your properties and you need to stay true to that.
You just need to do it in a way that is reasonable, respectful and within your rights as a landlord.
Being a great landlord isn’t about being best buddies with everyone – it is about getting the right team around you, dealing with people fairly, backing yourself with the best information available, and keeping the big picture in mind.
Keep these priorities in check and you will slowly but surely march towards financial independence.
ALSO READ: 10 Things every landlord wishes tenants knew