Why an Experienced Property Management Brokerage is vital in Reviewing of an Investment Property during your Underwriting and Due diligence phases of buying Real Estate
Blog Introduction: Investing in real estate can be a lucrative venture, but it comes with risks that require careful research and planning. One of the most critical steps in the process is ensuring that you have a skilled property manager on your team to review every aspect of the property before purchasing it. In this blog post, we will discuss the importance of having an experienced property manager’s review before the purchase of the property, specifically one that offers both brokerage and property management services.
1. A Dual Perspective
Having a property manager with extensive brokerage experience can give an investor a dual perspective on the investment property. They can assess the transaction side of the deal and also analyze the future life of the investment. This enables them to identify any potential complications in the property, including deferred maintenance and problematic tenant situations. These issues can impact the bottom line and detract from the property’s value. A property manager can spot these problems beforehand and help an investor make a more informed decision about proceeding with the purchase.
2. Avoiding Pitfalls
The old adage rings true in almost every area of our lives. We don’t know what we don’t know. Experience comes in two main forms of mistakes; (1) Your own mistakes; (2) Someone elses mistakes. When we choose not to bring in a team member with experience in the market, this asset class, the specific value add opportunity; to review a potential asset you are looking to acquire, investors run the risk of encountering pitfalls that can be costly and jeopardize their investment (and creating more “experience” for themselves later). For example, a tenant with a history of defaulting on rent payments, or simply an incomplete rental application file, can lead to legal proceedings, damages upon exiting the property, and no way to recover those damages leading to additional lost revenue for the owner. Similarly, deferred maintenance can cause the property to become run down, which can lead to a decline in rental income or force the owner to spend significant capital on repairs. It’s important to have a property manager who can identify and mitigate these issues before they become a problem.
3. Costly Investments
Investing in real estate requires significant capital, and without having a knowledgeable property manager on your side, an investor could end up spending much more than anticipated. Overlooking critical aspects of the property not only impacts the immediate cash flow but also affects the overall property value. Often these situations require additional funding, bringing in new partners or selling the investment, which were not part of the original plan. This can cause an investor to lose out on potential profits and could lead them to avoid future deals.
4. Balancing Expertise
One of the crucial factors for a successful real estate investment is balancing the expertise of a property manager, who offers both brokerage and property management services. These abilities allow them to analyze the property from every perspective before advising the investor on whether or not it’s a sound investment. An experienced property manager has an in-depth knowledge of the market and knows what risks to avoid, in addition to managing the property’s day-to-day operations. Not only does this provide valuable insight, but it also guarantees that the investor is well-informed about the property’s viability.
The importance of having an experienced property manager’s review of an investment property cannot be overstated. Investors who fail to consider all aspects of the property risk facing significant challenges that reduce or completely wipe out their profitability. With the expertise of a property manager who offers both brokerage and property management services, you can avoid future complications, save money, and make informed decisions about investing in real estate. Ultimately, having a property manager on your team can provide you with knowledge and expertise that’s too valuable to ignore.