A key question in determining how successful you will be as an investor is this: How much effort are you willing to invest in working with real estate? For example, if you are thinking of buying rental property, there can be a lot more work involved with the process than you might think. To make this clear, look at some of the responsibilities of owning a six-unit apartment building. Many of the day-to-day activities can be handled by a property management firm, but keep in mind, management companies often charge 10 percent of a property’s gross income, plus other fees, for their services.
When you own an apartment building, many tasks must be attended to. You can do some, even most, of them yourself, or you can hire people to take care of the work for you. If you hire people to do the job, you will recover less profit at the end of the year. However, you have to factor in what your time is worth. It may be less costly for you to pay someone else to manage your properties than it would be to take time away from your earning capacity. Once you acquire a building, it may need some immediate maintenance or repairs. If not, this type of work certainly will be required over time. Are you handy with tools? Will you do some of the work yourself? Do you have time to call contractors and meet them to schedule work you are not qualified to do? Not all buildings require a lot of attention in terms of maintenance and repair, but some do.
Every landlord knows that tenants make the world go around. Will you design, write, and place your own advertisements for tenants when you must fill an empty apartment? Can you be available to show the apartment to prospective tenants at various times during the day and evening? Does it frighten you to meet strangers after just one phone call? Are you equipped to screen the tenants, pull credit reports on them, check references, and do your best to get good tenants? Showing and renting apartments can be time consuming when you own several buildings or even one larger property.
Still other responsibilities exist. Who will cover the move-in and move-out checklists? Managing rental properties is not easy work. Even if you hire a management company to do most of the work for you, not all management companies do their jobs as well as you might like. For this reason, a successful investor monitors his management company carefully. Any way you look at it, handling rental properties is not stress free.