The Crucial Aspect of Passive Real Estate Investing Most Overlook

14

People start investing in real estate for a lot of different reasons. They usually boil down to one primary goal: financial freedom. Maybe that freedom is for retirement and said investor is building up a fund to serve their twilight years. Other investors may be looking to secure independence in the now, to free themselves from a 9 to 5 and discover the freedom to travel, live, and be.

The dream of financial freedom is a great one, and we know it’s possible to achieve it through real estate investment. It’s something we’ve seen time and time again firsthand.

That said, real estate investors, in their pursuit of their financial goals, often overlook what we believe is the absolute most crucial part of investing in real estate.

Download Your FREE Rental Application Form!

It may seem like a small thing, but having a solid rental application is the first step in finding great tenants. Since BiggerPockets is all about helping you succeed in real estate investing, we’ve put together a complimentary Rental Application for you to use. Download it today and go find some great tenants!

Click Here For Your Free Rental Application

We’re talking about customer service.

Customer service? In real estate investment?

You bet.

For the real estate investor, customer service usually means property management. You see, the problem is that real estate investors, in their quest to achieve financial freedom, tend to look strictly at the bottom line. And because of that, they don’t always place the value on customer service that it deserves.

These real estate investors think that by cutting corners where they can, by maximizing profits and minimizing costs, they’re following a solid investment strategy.

But trust us. They’re not.

Buying cheap houses is not a good investment. Relying on cheap property management is not a good investment. It’s something we’ve learned from experience and something we’ve seen over and over again in the industry. It might seem good. Sometimes the numbers make sense. But it really never adds up in the long run.

landlord-policies

Related: Yes, Customer Service DOES Matter in Real Estate: Here’s How to Make Yours Top-Notch

Why do investors settle for less in property management?

If it doesn’t make sense not to choose premium property management, why don’t more investors do it? Why do so many settle for less?

They’re only looking at the bottom line.

It’s logical to look at the numbers — but numbers don’t always tell the whole story. It makes sense to say, “I can save money by going with a middle-of-the-road property management company,” and so that’s what a lot of investors do. While there’s not necessarily anything wrong with that, they are missing out on the advantages of truly great property management.

They don’t realize the difference it makes.

When you’ve never experienced a premium or luxury product, imagining how much better it can really be is hard to imagine. If an investor has only ever come to expect average service and that’s been the pinnacle of their experience, their point of reference is skewed. Until they take a chance on something better, that’s all they’ll ever know!

Why is premium property management worth it?

It increased tenant satisfaction and retention.

When you invest in premium property management, owners know that their managers are taking care of their tenants. They offer attentive, quality services that ensure tenants feel well cared for, listened to, and comfortable while they rent. Instead of begrudgingly paying rent each month, they feel that their home and the treatment they’ve received makes the cost worth that much and more.

When tenants feel respected and well-treated by the management, they’re more likely to stay longer, which reduces turnover and the length of vacancies as word spreads about their good experience.

It increases value for owners.

For owners, premium property management means never worrying about their investments. It means having clear, constant access to information and reports, consistent, thorough updates, and never having to worry about being out-of-the-loop. It means your investments can truly be as passive as humanly possible. You can let go of the day-to-day details because you’re working with true professionals at the very top of their industry.

cap-rates-calculate

Related: 3 Tips to Transform Your Tenants From Apathetic Residents to Raving Customers

It improves reputation and desirability.

Your property managers are, in many cases, your face to the public. These are the people your tenants see. Much of your reputation (and that of your properties) hinges on the reputation of your managers. If your management is subpar, it will impact both your reputation in the community and your ability to fill vacancies when the word gets out.

On the other hand, when you have truly standout property management — the kind that goes above and beyond — you know that your managers will curate the best of the best tenants who know that you have a reputation for excellence. Not only will you have the advantage of your passive income, but the immeasurable value of a good reputation.

While settling for passable property management is fine, real estate investors owe it to themselves to place real value on excellent customer service if they truly want to accelerate their real estate investment business.

How do you handle customer service in your real estate business? Have you found a top-notch property management company?

Leave your comments below!

About Author

Chris Clothier

In 2005, Chris Clothier (G+) began working with passive real estate investors and has since helped more than 1,100 investors purchase over 3,400 investment properties in Memphis, Dallas and Houston through the Memphis Invest family of companies.

14 Comments

  1. Marcus Robert

    I couldn’t agree more!! I own 2 four plexus that I turned around due to my 20+ years in the customer service industry. It’s nice when your tenants tell you that you are “the best landlord that they have ever had!” Great Post!!!!

  2. Diedrick Nagle

    Amazingly valid article right here. I’m actually brand new, do not own any properties as of yet and this is gold to me. I understand the value of “investing” in the long term and big picture and how important that is when compared to cutting costs for temporary gain.

  3. Sonia Spangenberg

    Does anyone use a survey or other tool sent to Tenants asking for feed back on satisfaction with property management services? If so would you be willing to share a template? We are wondering what our Tenants experience is like. We have a property mgmt. company on our first property (SFH C/D neighborhood), but we are going to consider trying property mgmt. ourselves on second property (SFH B neighborhood). We are doing tenant screening/interviewing right now. We have a third property we are rehabbing that will be a four unit (B neighborhood). We will most likely put this one with a property mgmt. company but we are not sure if we will change mgmt. firms yet.

    • Chris Clothier

      I am not sure how many companies survey their tenants, but I can tell you a couple of questions to ask your management company and you will get a pretty good idea of what a “survey” will tell you.

      1. How many years is your average lease?
      2. How many signed leases fulfill to completion?
      3. How many of the signed leases renew into a new contract?
      4. What is the average length of stay for each tenant?

      The answers to those four questions will absolutely help you to figure out how highly that management companies clients would rate them. It helps to break through the clutter of both good and bad comments and get a real picture. The higher the rates, the better.

      All the best to you – Chris

  4. Will Chamberlin

    Good article, Chris. The issue I came across was that there are only two options where my house was, bad and worse. I ended up taking on the management myself remotely and it has worked out because I have good, long-term tenants in the place. The management can really make or break your investment especially when you aren’t in the same city to supervise.

  5. Jake Knight

    Great read. My question is: how do you truly know which property managers are good, versus which ones are great? It seems as though it’s trial and error, especially if you are investing in an area outside of your local market.

    • Chris Clothier

      Hi Jake,

      In many cases, it will difficult to know, but the questions I listed above will be a start. I have also listed questions on the forums that are a good start when interviewing management companies. The answers to those questions will help you to determine who is quality and who is not. It is difficult sometimes as you read in Will Chamberlains’ comments that he could not find good management.

      Chris

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php