Despite the fact that legendary investors and real estate industry heavy weights like Warren Buffett would never be caught dead managing their own properties, and would never have attained the level of success they have if they had stayed small many investors continue to put off leveraging the advantages of a full service property management company.
The financial benefits of enrolling the help of a professional property management firm for handling day-to-day activities and boosting returns is just basic math. Some still struggle with balancing this boost to yield and total returns with the fear of giving up micromanaging. This is almost understandable, well at least the fear can be.
However, one of the most significant and underappreciated benefits of having a property management company as a part of your team is actually for minimizing risk and liability. Some have downgraded general risk as a concern due to the incredible real estate rebound that the U.S. is experiencing. Still, no matter how large the portfolio or reserves it can all be lost very rapidly without proper risk management, and the danger is even worse for smaller investors.
So how can a property management company aid investors in minimizing risk?
6 reasons not to invest in income property without a professional property management firm:
1. Buffer from Liability
While the U.S. may be one of the best markets for real estate investment right now it is almost one of the most litigious. The law can offer great protections, yet all too often makes owners of properties juicy targets for frivolous and malicious lawsuits. Having a third party buffer can offer an incredible shield to deflect and discourage these situations.
There are few individuals that really relish pouring over the books for hours. For investors attempting self-management this can lead to many expensive mistakes and missing out on a lot of income or tax breaks. Let a pro do it, and ensure it is handle right. The last thing you want is the IRS camping out in your living room for a month trying to make sense of your books.
3. Reducing Financial Risk in Marketing
One of the most important elements in maximizing income property investments is marketing. Unless you are coming in an already experienced veteran marketing pro this brings a lot of risk of waste. Tens of thousands can be burned quickly if simply shooting from the hip. A good full service management company normally already has a book of tenants and knows the market well so that they can maximize rental income with the right positioning.
4. Superior Tenant Screening
Bad tenants have become far smarter these days and it takes superior screening tools and strategies to weed them out and cut plans to take advantage of landlords short.
5. The Law
Unfortunately ignorance is not an excuse for breaking the law, and with regulations and rules constantly influx property management can be a legal minefield for those not on top of changes 24/7.
Perhaps the biggest risk of all for those getting into real estate for passive income and wealth building is that it becoming another job. Being a landlord can be far more than a full time job. In fact, it takes a whole team. Let someone else deal with the stress, while you relax and enjoy the rewards.