Even with high mortgage rates, real estate is still the favorite investment of many U.S. adults. In 2022, 29% of Americans noted it’s their top choice for investing money they don’t need for the next ten years. By contrast, only 26% said stocks were their number one pick.
This 2023, real estate investing may grow even more with the expected dip in mortgage rates. Thus, going with real estate is a wise choice if you’re looking to invest this year.
An investment property management company, in turn, can help you reap the most profits. Hiring one can be particularly helpful if you can’t or don’t want to manage your property actively.
To that end, we created this in-depth investment property management guide. Read on to learn what these companies do and why you should hire one this 2023.
What an Investment Property Management Company Does
An investment property management company manages all tasks related to an investment property.
An investment property is a real estate property purchased to generate profits. Examples include rental homes, apartments, and office buildings.
A property management company’s services typically include the following:
- Cleaning and maintaining the property
- Marketing properties for rent
- Finding and vetting tenants
- Ensuring rental rates are competitive
- Collecting rent
Property managers also ensure their clients’ properties comply with rental laws. These include the federal Fair Housing Act, which prohibits discrimination. There are also state-specific laws, such as those on disclosures.
Why Should You Hire One?
Hiring a property management company lets you generate actual passive income. You can also rely on them to keep your properties occupied and have a lower tenant turnover rate. With their help, your investments can appreciate rather than depreciate.
Passive Income Generation
For rental property income to be passive, you shouldn’t actively participate in it. This means you shouldn’t be doing much work to keep it habitable and inhabited. Instead, you only have to delegate those jobs to a professional, in this case, a property manager.
Once you generate substantial wealth, you can hire a family office investment firm. Their team can help with property asset management and portfolio diversification. For example, they can help you make commercial real estate investment decisions.
Ensure Your Property Is Habitable
To keep your property habitable, it must be safe and free from dangers and defects. An example is an outdated or faulty electrical system. It’s a leading cause of home fires in the U.S., accounting for about 51,000 fires yearly.
Another example is a pest infestation. Before renting your property, you must ensure it’s free of pests. Depending on your state, you may still be responsible for this even after tenants move in.
Also, remember that pests don’t only apply to insects, rodents, or reptiles. They can also be indoor mold, which can cause health woes. So, you must also ensure your rental property is free of mold infestation.
When you hire a property management company, you hand over all those tasks to them. They become the manager’s responsibility, freeing you of hassles and headaches.
Lower Tenant Turnover
Market experts expect year-over-year rental prices to grow this May 2023 to 8.4% from 5.8% in June 2022. That’s exciting news for rental property owners, but only if they can get and keep tenants.
After all, losing tenants can cost you, the property owner, thousands of dollars in just one month.
Your tenant turnover rate can rise if you don’t respond to their requests ASAP. These can include asking for help with plumbing, electrical, or structural problems.
Likewise, you may lose tenants if you jack up your rental price so much that they can no longer afford it. Remember: Most renters rent because they can’t afford home ownership.
Indeed, a March 2022 survey found that nearly 1 in 3 renters can’t afford to buy a home in their city. Another 30% said they struggle with the down payment alone.
A property manager can help prevent those issues because it’s their responsibility. For example, they’re the ones your tenants call for requests, and it’s their job to respond ASAP. They also do market research to ensure they charge competitive rental prices.
Real estate properties often appreciate due to the land they sit on.
By contrast, a real estate property’s physical structure tends to depreciate. After all, it develops wear and tear over time.
Unfortunately, wear and tear usually occurs faster in rental properties.
Thus, maintaining your rental property is vital to prevent its degradation. These include regular electrical, plumbing, and roofing maintenance and immediate repairs. Fortunately, as mentioned above, these are all tasks property management companies handle.
Reliable managers can also advise you on upgrades that can boost property value. For example, they may recommend furnishing your property with energy-efficient appliances. They may also suggest energy-saving window replacements or installing solar control films.
Another crucial role property managers play here is vetting tenants. They look for ideal tenants who can meet payment terms and care for the property.
One way property managers select tenants is through screening. This involves verifying each applicant’s identity and checking their rental backgrounds. For example, managers ask prospective tenants about their former landlords.
They then speak with former landlords to learn about their past tenants’ reliability. This includes asking questions about late rental payments and other tenant disputes.
Managers also use interviews to discover how tenants left their former rental place. Then, if they find one who left it in a wreck, they won’t let that person live on your property.
Hire an Investment Property Management Firm
Hire an investment property management firm to maximize your rental income this 2023. They can help manage your rental properties and even help you find the best places to buy and rent out.
With their services, you don’t have to do any back-breaking work. Instead, you can sit back, relax, and wait for your passive income.
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