Tip of the Month - January 2015

Owning and operating small investment properties has made many people financially independent. As a real estate investor, you may have the pride of ownership coupled with a hedge against inflation that serves to protect your asset from losing value. As a property manager, your two chief concerns are: #1-maintain your property #2 increase its value.

Regardless of your specific goals, effective management is the key to achieving them. Simply owning rental property will not guarantee financial independence, because properties do not generate cash flow by themselves. To make money, you need to know good property management techniques. You need to know: how to keep good tenants: how to collect the rent on time: how to maintain: the physical structure of your property, and most importantly, how to deal with people.

To some extent, owning your home has prepared you for owning other buildings. However, managing rental property is not the same as managing a home. For example, decorating schemes that might be perfect for your home-especially colorful ones-could do not go with a prospective tenant’s furniture. In apartments, carpeting and wall treatments should be in neutral colors, and in materials that are durable and easy to clean and maintain.

Kitchen appliances also are different for rental properties as compared to home use. You may choose to buy a range with added features for your home, but a tenant who does not cook will not want to pay a premium rental for having it. Also, as a property manager, you must be aware of depreciation-thus you might choose a different water heater or furnace for a rental property than you would for your own use.