Capital Street

Tenant Treasures | Part 3

Hey, we’re back with another installment of The Guide to Profitable Real Estate Investing! If you choose great investment properties, per part 2 of this series, you will make money in equity when you sell (as long as your timing is right). But you came to us seeking information about professional property management, so you must plan to have renters. You are a “buy and hold” investor. Do you know how buy and hold investors make money? TENANTS Your tenants are a key ingredient in building a profitable rental portfolio:
  • They reduce your expense liabilities by covering your mortgage payments, property management fees, and other ongoing expenses. Basically, they are purchasing your property for you.
  • They increase your monthly income through monthly rents. If you made a good purchase decision, the rent will be more than your expenses. That margin provides short-term profit and/or seeds a healthy reserve fund for maintenance.
As you can see, tenants are extremely important. You want to make sure the ones you place in your property are treasures – they pay on time, live peacefully, take care of your property, and stay as long as possible. I could go into all sorts of details about how to identify a great tenant, but most buy and hold investors I know don’t really want to dabble in the day-to-day management of a property. They are especially reluctant to deal with recurring tenant needs because doing so drains time and energy.  As an investor, you should care more about how your property management company deals with tenants. You should be looking at each potential company’s:
  • Vacancy Rate – What percentage of managed properties are vacant?
  • Vacancy Durations – How long does it take to fill vacancies?
  • Lease Renewal Rate – What percentage of existing tenants renew leases each year?
  • Company Culture – Are staff members professional, knowledgeable, and courteous?
  • Tenant Ratings and Reviews – What do tenants say about the company online?
Let me clarify that you will nearly ALWAYS see bad reviews from tenants because professional property managers work for owners and investors. We must enforce lease terms and sometimes that ticks off tenants (so they let the world know…)! Remember to keep this perspective when reading tenant reviews and instead evaluate how the company RESPONDS to complaints and look for red flags. Examples of red flags:
  • There is a recurring theme to tenant complaints.
  • The company completely ignores negative reviews.
  • The percentage of negative complaints is unusually high.
  • There are zero positive reviews from tenants.
Remember, tenants are your treasure; they are your CUSTOMER. They have value! You want to make sure the property management company you hire sees tenants as treasures too. Would you like to know more about Capital Street Management’s track record with tenants? I’m happy to share! Give us a call at 973-849-1638

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