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Why Every Property Investor Needs A Property Manager

PMI Accelerate - Thursday, October 29, 2020

The easiest way to define the benefits of hiring a property manager is to take a step back and reflect on whether you consider yourself a real estate investor or a landlord. 

Real Estate Investor vs Landlord

So where do you line up? 

 The Defining Characteristics of an Investor:

  • Makes decisions to improve the profitability of their property or portfolio
  • Willing to invest in the upkeep of the property to enhance tenant retention
  • Involved in the long-term operation of the property, but stays away from the daily minutia
  • Constantly looking for opportunities to invest

The Defining Characteristics of a Landlord:

  • Still the owner of the property, but involved in the daily operation of the property
  • Always on-call to meet tenants’ need (is their toilet clogged?)
  • Finds a way to reduce the cost of the property expenses to limit his/her out-of-pocket expenses
  • Focused on paying down the mortgage on the property, but inundated with taskers designed to distract from this primary focus
  • Has let the investment become their J-O-B

As you can see, an investor is thinking of the long-term growth and expansion of their property and portfolio to increase their bottom line and profits. A landlord, however, wants to limit expenses so that they have more money to pay down the property’s mortgage and place into their back pocket.  The primary difference is how they decide to use the money generated from the property: either to pay themselves through the daily operations, or to pay themselves through their investment techniques.  Ultimately an investor wants to “minimize risk while maximizing returns.” But that’s impossible to accomplish if you’re a landlord and involved in the daily operation of your property.

Although many property investors become landlords because they want to save, this strategy ends up costing them more.  This is a simple concept… where is their time more valuable, finding and investing in real estate, or daily management.  

This is why there are Property Managers.

Property Manager Benefits

1. Increases Time Efficiency

Being a property manager is a labor-intensive task that can take many hours of your day or week. As an investor, time is a vital resource because the more of it you have, the more time you have to pursue other investments and increase your return.

2. Reduces Risk

 Besides having a vetted list of eager tenants, property managers also know how to diversify a property portfolio to ensure you’re not overexposed to a certain type of tenant. A more diverse portfolio means you may have a variety of tenants, reducing your risk of default and freeing you up to better returns. 

3. Increases Retention

The most detrimental aspect of property investing is a vacancy. Property managers are responsible for maintaining your property and building rapport with tenants, reducing turnover. Furthermore, they should be fully focused on renewals and streamlining processes to ensure that any new tenants are placed as quickly as possible. This is often why you see renewals as a percentage of rent. If they can increase rent, AND reduce vacancy, everyone is happier and has received more money.  

4. Great Resource for Connections

To be a better property investor, you need access to connections that will help you develop and access investment opportunities. A property manager is a great connector and a resource for expanding your network.

The takeaway? If you consider yourself a property investor, you need a property manager.