Investment Management: 10 Tips
Curious about investment management and 10 tips that will save you time and money? What exactly is investment management? It applies to any investment property, such as apartments, malls, garages, shops, restaurants, etc. Investment property is purchased with the intention of renting, not reselling. Learning how to manage or hire management companies is one of the main steps involved in being a profitable investor.
- Management skills. How exactly do you get investment management skills? Many would-be investors fail due to this simple fact. You can have a positive cash flow apartment complex, but without simple people skills you are doomed to failure. Before investing, take a job as an apartment manager or assistant apartment manager to learn how to cope with tenant problems.
Playing nice or hard ball. Keeping the tenant happy should be your number-one goal. Your number-two goal is to play hard ball when necessary. Any landlord who does not know when to put his foot down will not succeed. Be a friend to all tenants, but know when to be the boss also.
- Tenant screening. It is imperative that all landlords screen their tenants. The potential tenant must have a full verifiable application. The landlord needs to run a credit report or be presented with a credit report by the potential tenant. Job and bank account verifications should also be done. Remember, gut feelings should also play into this screening process. Top investment managers know from first sight a good prospective tenant.
- Hire brokers to screen potential tenants. One of the smartest moves you can make as an investor is to hire a local broker to find acceptable tenants for you. This broker will post a professional sign in the front lawn, run the credit reports, screen the tenants and show the apartments. The broker charges a one-time fee and can be held responsible for bringing in a bad tenant. There are no long-term contracts and no obligations to use the broker again.
- Maintenance crews. Maintenance crews can cost the investment manager a good portion of his investment. By hiring individual people to handle their own specialty, money can be saved. Hire one man for the electricity and one for the roof. Sometimes there is one man that can reasonably do many jobs, but never hire a maintenance crew as they will always be more expensive.
- Gardeners and lawn maintenance. Curb appeal and lawn maintenance are imperative in running any type of investment management business. Whether it is an apartment complex or a 60-unit shopping mall, gardeners and lawn crews are worth their weight in gold. Look for the best.
- Eviction problems. Landlord insurance will help investors in case of eviction problems. Look into getting adequate coverage. One court battle can cost you all your profits for a few years. This is where tenant screening comes in. Make sure all tenants sign rental contracts with specific clauses on how they are responsible for legal costs in case of evictions.
- Maintaining a positive cash flow. In order to purchase a second investment management property, you must show positive cash flow on this one. The bank will request all records on your current property. So before considering a second property to purchase, make sure your investment management skills are perfect on this one.
- Benefits of management companies. Many investors with multiple properties will choose to hire a management company. It saves them time to concentrate on other projects. An investment management company will have the expertise and the knowledge of how to handle and screen tenants.
- The pitfalls of hiring a management company. One of the main pitfalls of an investment management company is money. The management company of course will charge fees that may break the investor's profit sheet. Some management companies will hire maintenance crews that will cost more than if the investor had hired individual people. Most investment management companies charge a percentage of the rental income. Keep in mind that a bad company can cost you your total investment due to poor management skills.