Thoughts on Successful Fayetteville Property Management for Landlords and Investors
As a real estate investor in Fayetteville, North Carolina, your goal is to make money through rental income, appreciation of your investment property, and profits generated by other business activities that depend on the property. The realized benefits of investing in property in Fayetteville include a passive income stream, stability of cashflow, diversification of investments, and the ability to leverage capital for other investment opportunities.
While there are many opportunities in real estate property investment, it can also prove to be a mistake if you don’t fully understand the best practices and procedures necessary to make the management of your property a success.
Here are a few tips to begin setting you up for success.
1. Can You Rent the Property You Are About to Purchase?
It may come as a surprise to you, especially if you are a first-time real estate investor in Fayetteville, that you may not be able to rent the property you purchased in Fayetteville. While there are usually few restrictions on single family homes, prior to purchasing a condominium, or a house that is part of a homeowner’s association, could possibly lead to problems when attempting to lease your investment property. Sometimes, an HOA will place restrictions on the percentage of properties that can be rented out versus those that are owner occupied. What this means is that only a percentage of properties can have renters in them, the remaining must be owner occupied. Some HOAs even go so far as to expressly prohibit renting out your property at all.
What this means for the property investor is that a property that is part of an HOA with these particular covenants will more than likely not be a good property to invest in. You could end up with your property empty, and have to wait for clearance from the HOA before you can begin turning a profit.
Always be sure to read the covenants and HOA bylaws before you purchase a property, whether for investment purposes, or otherwise.
2. Leave the Spoken Word to Poetry Night
Get every single detail of your property management with your tenant in writing. Despite common belief, you are not required to have anything in writing to form a contract for the lease or management of your property. In fact, everything can be done orally. But as you can imagine, this is a headache waiting to happen.
In our over 22 years of real estate and property management in Fayetteville, North Carolina, we have come across numerous property investors, when asked for a copy of the lease, didn’t have any leases in place, even with long term tenants. Although the default lease will be constructed by courts using the applicable laws, this practice does not protect you as a property investor.
3. Have a Plan in Place to Deal With Financial Issues
As a property investor, you must have cash on hand to deal with issues that arise. Unlike other ventures, to be successful at real estate investing, you are required to have a greater amount of capital assets, even if you only have one investment property.
Financial issues, however, are not limited to repairs and maintenance on your investment property. As property managers in Fayetteville, we can appreciate the vast number of opportunities that are available to real estate property investors in the area. As an investor, you must ensure that as you gain properties you adequately budget cashflow and time to evaluate opportunities that may come up. Failure to plan in advance for these inevitabilities, will result in missed opportunities in the future.
For investors looking to expand their portfolio, we recommend saving at least 25 percent of your rents, in a separate fund tied to a separate LLC, to prepare for future opportunities.
4. Inspect, Correct, and Inspect Again.
Frequent inspections of your property are absolutely critical if you want to increase the value of your asset or cash flow. When you have a property management company in Fayetteville, North Carolina manage your properties, this is easily done. Your property should be inspected at least every quarter. If your property is inspected by a property management company, they should include a detailed report which includes pictures or video of your property, and the report should be distributed to you by your property management company within 48 hours of it being documented.
As a practical matter, don’t wait until the move out inspection to inspect your property. This is a disaster waiting to happen.
5. Proper Tenant Placement
One of the jobs of a property management company in Fayetteville is to ensure tenants are placed in properties which fit their needs as well as their ability to meet the obligations contained in the lease agreement. As a real estate investor, if you don’t utilize a property management company, this is also a consideration for you.
Your first understanding should be that every tenant is not suitable for your property, but there are properties suitable for particular tenants. This is not withstanding any illegal discriminatory housing practices. What we are referring to is the fact that there are many tenants who, among other things, will not meet the income threshold to rent your property; tenants that have pets that are not service or support animals; tenants with a number of occupants that exceed your investment property’s capacity; and tenants who have an extremely unfavorable rental history.
What proper tenant placement means is to ensure that the tenant you decide to lease to has the potential to be with you for the long term. If you have multiple properties in your portfolio, then you may have another to offer the tenant if the tenant does not qualify for the one they desire. If you only manage one or a few, don’t be afraid to turn a tenant away. Compromise never ends well, and will ultimately have an effect on your cash flow’s bottom line.
6. Just in Case, Get insurance.
One of the things that is often overlooked by property investors in Fayetteville is the need to have insurance. I’m not referring to just general home owner’s insurance, but insurance to protect every aspect of your investment.
Remember, you are now a business owner. Your investment property should be a separate and distinct entity from you. The structure surrounding it should be just as separate and distinct. Your goal should be to protect and shield your personal assets in the event something goes wrong. This fact applies whether you have one property, or a portfolio of multiple properties.
Your risk, and other investment property insurance, should be structured to shield you from lawsuits by tenants for injuries; legal action brought as a result of violating housing laws; vandalism of the property; or destruction of the property. Some insurance policies will even protect against lost cash flow.
7. It’s Business, Not Personal
As a property investor, you have to understand that you are running a business. Generally speaking, many property investors perform horribly at maintaining a distinction between their business and personal dealings. In fact, most landlords and property investors do not treat their investments as a business at all.
Did you form a separate business entity in your state?
Did you have your business registered in your state?
Do you have a separate bank account for your business?
Do you have a separate operating and trust account for your business?
Are all the documents used when transacting business with tenants reflective of your business entity?
These are a few of the things that truly make your business a separate entity. The way you treat your business will be an overall reflection of how your operation is run. While none of this is necessary, it serves to provide your business with a sense of professionalism, and in turn, you will be treated and feel like a professional.
Get Help Early and Often
These best practices apply whether you own one or multiple properties.
The responsibilities of a real estate property investor in Fayetteville, North Carolina extend beyond merely collecting rent. While, arguably, rent collection is the most important as this is the lifeblood of your cash flow, it should not form the only foundation in setting yourself up for success in your long-term investment strategy.
At Linchpin Property Management, we have written a blueprint to ensure our landlords and real estate property investors are set up for success. The good news is we provide this resource to you regardless of whether you use our services or not. It is our belief that the more educated investors are, the better it is for everyone around.
Download your free resource below, and begin the path towards better and more effective real estate investment.
The Team at Linchpin Property Management.