DIY or Professional:
Which is better for you?
Veteran Investor Gord Lemon asks (and answers) the
Many people recognize building a real estate portfolio for passive income and equity growth can be an integral part of creating monthly income and a healthy retirement nest egg.
Often the tipping point as to whether an individual embarks on such a pursuit ultimately comes down to whether one has the desire and fervour to become a landlord.
This decision should be pondered carefully and not be taken lightly. Whether you are currently a landlord or considering becoming one, the following suggestions in this series may give you some insight into how to cope with this challenging role, confidently succeed and ultimately save time and money.
The eternal question: Self- manage or hire a professional property manager?
When faced with purchasing one’s first investment property, many often decide to take on the property management themselves to save money, attempting to procure the largest possible cash-on-cash return from their cash invested.
The responsibility in being a landlord is not for everyone and must be done with much forethought and strategy. As in any job (and yes, you have bought yourself a job) without utilizing proper skill, the experience has known to be disastrous, producing lasting negative effects, forcing even the most well-intentioned investors to run from real estate, never to return.
Becoming your own property manager of one or more properties does have its challenges. There are however, many ways to create a joyful experience as a hands on landlord and build a portfolio of properties that require very little time and run smoothly.
The first rule of self managing is to build the tenant/landlord relationship as friendly but professional relationship from the beginning. It is important to never get “too close” as to change the professional dynamic. The mistake many landlords make is becoming friends with their tenants, which often leads to the landlord being taken advantage of as “new precedent” continues to be set each time the landlord acquiesces to the tenant’s requests or ‘favours.”
Creating an interdependent tenant can be the major component in a blissful landlord/ tenant relationship. This means ‘training’ a tenant who isquite content to keep their own unit as well as the common areas and exterior in good shape, and be willing to consult with you regarding any necessary concerns with the property or other tenants.
The kind of relationship you want to avoid is the dependent tenant who feels they can call you at all hours for any and all reasons from “my tap is leaking” to “the neighbour’s dog keeps me awake by barking all night.”
Conversly, a tenant relationship to avoid is the independent tenant who feels they can make their own rules. They tend to do everything on their own, from repairing things on their own (and expecting you to pay for the repair later), even before you knew a repair was necessary, to “managing “ the other tenants in the building, which often becomes a reason for other tenants to vacate.
Therefore, an interdependent tenant is your ideal long-term tenant who you can count on to be reliable, helpful and pay their rent on time. This relationship development can begin at the initial point of when you run your ad.
As a real estate investor, you must make the most of your time at every turn. This begins when you run your ads for tenants. Placing effective ads in your business is crucial to “weed out” any time-wasters as they often cost you time and money later.
By being extremely diligent in the beginning you can avoid many tenant disasters. This process starts with how you word your ads. For example, an ad which reads: “Apartment for rent in Candlestick Park: 2 BR, $1500. Call 000-000-0000.”
An ad like this has put you in the same category as everyone else running an ad. To differentiate yourself from the competition, you must become more creative to attract a good tenant. For example: “A Rare Opportunity! A recent vacancy in the extremely desirable Candlestick Park area. Over-sized 2BR apartment. Spectacular view of neighbourhood. This won’t last! Call 000¬000-0000 to get the address of this gem.” An ad like this has successfully created curiosity and desire.
Another screening strategy: To avoid wasting time on the phone with prospective tenants, have interested prospects call a number with an automated voice message saying: “If you are interested in the 2BR apartment in Candlestick Park, please drive by the property to ensure the area is right for you. The nearest cross streets are Elm St. and Fir St. Once you have driven to the area and feel it would be right for you, please go to firstname.lastname@example.org. Only successful applicants will be notified for a viewing.”
Let’s pause for a moment and review what you have accomplished in these steps, because it is indeed more than what lies on the surface. By asking people to drive to the area, you are eliminating those people who are averse to taking direction, perhaps the “independent” type tenants. People that actually do drive to the area and don’t like the area will now not be wasting your time because they have eliminated themselves.
The people that do follow your instructions have perhaps moved up the ladder to becoming that “interdependent” tenant you desire.
More in Part 2 of DIY or Professional
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