I recently came across a great article about the Next Frontier Of Property Management Technology. The article explains how the DIY real estate investor is changing and becoming more sophisticated. New tools and cloud-based rental property management software is now available to help streamline their operations, with costs that fit a small investor’s budget, it makes it a no brainer.
Streamline Early for Maximum Growth
It may seem counter intuitive to think about setting up processes to handle only one rental. However, this is exactly when it should be done. Creating a process to manage one rental is simpler and easier than trying to do it when you have five. Once you have a process for managing one, you just scale up from there.
One of the hardest things about rental properties is that they are supposed to be a passive investment. I can ensure you, it is anything but passive. From chasing down rent to dealing with tenant issues and complaints, one house will make you rethink this investment strategy, let alone five. When you are constantly waiting for “what’s next,” an extra hundred dollars a month just isn’t worth the effort.
Utilizing tools like a property management system is so important in the beginning, just to ensure you will stick with the investment strategy and want to grow it. If you have dreams of expanding and truly using rental property to become independently wealthy, you need to streamline early for maximum growth. Otherwise, it just won’t be worth your time.
Using Data to Make Better Business Decisions
When you decide to buy your first rental, you have made the decision to go into business for yourself. It is really exciting to think about the cash flow from a rental investment coming in every month. I used to think of the first of every month as a holiday, I called it “Rent Day!”
It is a holiday for the most part. That is until the expenses start to come in, like repair bills and utilities. Those ongoing and surprise expenses quickly strip away the profits you are supposed to be getting. The repairman and utilities know they are running a business, when costs go up, their prices go up.
For rental properties, the market defines much of the price we get for our properties. This is where data comes in handy, to ensure we are getting market price for our properties. Because if you are not charging market rent, you are subsidizing your tenants housing costs and managing a charity.
I was talking to an owner recently who missed out on over $2400 in extra rent last year. They had a section 8 tenant in their rental and didn’t realize the HUD FMR rates had increased over $400 a month. They had looked early in the year to set their price increase and left it until next year. HUD, however, releases a mid- year update and this is where the change happened. Because they weren’t utilizing a holistic property management system, they missed out on significant income. Well worth the cost of a few bucks a month just to keep an eye on things.
Owning and running your business means data is necessary. You can’t make good business decisions without knowing your data. It can tell you where to invest, which properties make the safest investment, what to rent the properties for, and when to sell. Understand your investment and you understand your business.
Tools for New Investors
One of the more exciting areas of new innovation are tools for new property investors. While some property management software suites offer the ability to manage tenants, few are focusing on the whole picture. The pinnacle of a property management software is one that provides a cradle-to-grave model for buying your first rental property, managing it, and knowing when it is time to sell.
Tools like a rental property calculator will give you some of the information you need to make important decisions on which property to purchase. But they miss the bigger picture: the economic trends for the area. Would you pick stocks at their 52-week high or do you research and find stocks that are poised to increase in value? Understanding the local economic indicators is that research into whether you are buying property at its max value or if you are about to get a good deal.
Would you like to see the whole picture with your rental? Whether you are just starting to look or are already managing rentals, it is never too late to see your property data.