New year, same excuses

As we look forward to 2012 and say goodbye to last year, many new real estate investors will forgo using a property manager in lieu of becoming landlords themselves for the first time. It may even be one of their yearly goals to acquire an income producing rental property. The fast and lucrative lifestyle known as real estate investing, a dream which yields hoards of money overnight and comes with a fully loaded German-engineered luxury vehicle, is just a two bedroom rental condo away from reality.

To some that may be true and I’m not knocking the idea of a PM business starting small. I have personally witnessed the power of real estate investing, but with all kidding aside most new real estate investors who plunge into managing their own rentals find themselves at a disadvantage early and often when it comes to entering the game know as landlord versus tenant.

The rules of the game are fairly simple and most of the time both parties play by them. Overly simplified, the landlord’s duty is to supply a safe and temporary inhabitance for the tenant, who in turn pays an agreed upon rental rate for the right to occupy the dwelling for a contracted amount of time. The objective of the landlord is to bank or reinvest the cash flow (amount in excess of the mortgage payment and operating expenses) from the rental unit(s) each month and build wealth. The disadvantage begins when the new landlord places a tenant who doesn’t play by the rules of the game, throwing a monkey wrench in the whole building wealth formula.

The battle scarred and seasoned tenant alters the game to their advantage with rule changes that may go something like this; initially the rent is a couple of days late, then a week late, and then a request to change the rent due date because “They get paid later in the month”, then a phone call stating that their hours have been cut or that they will be a little short this month and can only pay a portion of the rent, then finally no return calls and nothing but silence.

News flash: if it gets to this point in the game you may have already lost. Though truthfully, you have been losing the whole time. At this point you are owed a couple months’ rent and need to start the eviction process while hoping that your property isn’t totally destroyed. There is no guarantee that having a professional property management in place would have stopped this from occurring but odds are an experienced property manager who is familiar with these trends would take fast action to limit the downside risk in these situations.

In property management it’s not if these issues will occur but how you deal with them when they do that makes you successful. Start the New Year off right and let one of your real estate resolutions be to add a professional property manager to your team.