As real estate investors we need tenants to occupy our rental properties so that we continue to receive the cash-flow we love each and every month. Many of us rely on our property managers to market and advertise the property, but some of us manage our own properties. Even if you're a highly passive investor using the services of a manager, you may want to share this list with your property manager to help you out the next time you have a tenant turn-over.
Classifying a neighborhood by “type”, or what many investors refer to as a “grade”, is typically nothing more than a subjective description. Although most people will have a general idea of what is being referred to, in my experience it is usually nothing more than a qualitative rather than quantitative description.
There are two basic types of real estate markets: Linear and Cyclical.
Cyclical markets are real estate markets that tend to have larger price moves up and down over the years. Property values move up and down like a roller coaster ride with noticeable peaks and troughs. They are the shooting stars of housing booms (and busts). Cycle lengths vary between markets but often last between 7 to 10 years from end to end.
The feedback I get from investors across the country is that we are in a seller’s market. Prices are up. Inventory is low. Properties in the hottest markets are selling over asking price with multiple offers. Investors are paying “more than they want to” just to get a deal done. The ratio between rents and purchase price is favoring sellers and squeezing investor buyers out of the market. Another way to describe this trend is that CAP rates are decreasing, or “compressing”.
We are approaching a delicate part of the market cycle where the flood of inexperienced investors is driving prices up to places where experienced investors shake their head and wonder, “How is the winning bidder ever going to make a profit?”
Hiring the right property manager is important for protecting your investment and achieving reduced vacancy time and maximized income.
A good property manager will bring high quality tenants to your rental investment properties. They will have a strong screening process and stay on top of maintenance issues. He or she will generally make your life easier by using technology to run an efficient operation and reach a large audience of potential tenants.
How does a real estate investor go about finding a good property manager?