Best Practices for Independent Rental Owners â€“ The New Year is Your Opportunity
By Lucinda Garland, CPMÂ®, GRIÂ®
FBS Property Management
Many rental properties are owned and operated by independent owners. Though their rentals are subject to evolving market requirements and demands of a new generation of renters some owners manage their real estate under the philosophy that they are in the best position to decide their operating practices. They choose who and how daily management, leasing and maintenance are done. These can be decisions of commission or omission. The question is two-fold: are best practices being employed? How does an independent rental owner identify best practices?
For answers to these questions and more we have asked FBS Vice President, Lucinda Garland, to present a series of articles â€œBest Practices for Independent Rental Ownersâ€ that will be available in various publications from time to time and become a regular feature at Rent Sense.
Lucinda is a Certified Property Manager (CPM) and a Graduate of the Realtor Institute (GRI). Her 25-year distinguished property management career has been refined with earning these internationally recognized professional designations. Ms. Garland is an industry leader currently serving as a board member for the local chapters of two of the most influential national trade organizations within the real estate industry; the National Apartment Association and the Institute of Real Estate Management. She is an expert on â€œbest practicesâ€ and therefore an indispensable resource to our independent real estate investors. Neil& Chris
Part one of a series
When you own rental property, the beginning of the New Year is an opportune time to study where you have been and decide if you are making the right decisions to get you where you want to be â€“ have you been postponing that deferred maintenance because you canâ€™t figure out how to pay for it? Is it time to think about making some improvements to increase the value of the asset? Have you put off the conversation with your property manager about how your objectives have shifted? Have you taken the time to reconcile your stated objectives with your real goals? Is it time to make a fresh start with new staff and/or Management Company?
To prepare for a New Year of managing rental property a written strategy should be drafted: budgets are drawn and discussed, staff is evaluated for effectiveness, historic occupancy is challenged, Net Operating Income is re-forecast, and expense is analyzed to assure your money is spent in the â€œrightâ€ places. And knowing that your management team is on the same page and operational decisions flow from an approved game plan. Understanding what you want your property to do in the coming year is the necessary first step. A strategy to achieve can be drafted for consideration, evaluation, and approval. A written plan can be implemented and quantified for incorporation into monthly reporting.
Back to step one, take some time to evaluate what you want:
Do I intend to keep this property long term or am I looking to sell in the next 24 months?
Comment: Being able to relay this information to your management team empowers them to make decisions on your behalf that work toward your priority goals.
What is more important to me â€“ making sure the rents are reflective of the market or sitting with the status quo and keeping my building fully occupied?
Comment: Sometimes, having 100% occupancy is not the best decision â€“ each dollar lost on market rent has an adverse effect on the value of the property as a whole.
Is my management team maintaining the building and grounds?
Comment: Have they become complacent with the appearance of the property due to age of the structure or lack of funds for improvements. It doesnâ€™t cost much to assure a property is maintained in a clean condition. You cannot make an older asset new, but you can certainly keep what you have in clean condition. There should always be a short term and a long term physical plan. Example â€“ long term might call for complete exterior paint while short term routines include power washing and touching up the main entrance.
Are my financial needs/goals being met?
Comment: Much of the answer to this question needs to be related back to the answer in #1. Unless your management company knows what you want, they canâ€™t get you there, unless by happenstance. If your management team knows your goals but cannot seem to turn these into practical milestones it is time to make a change.
Often times, we continue to do what we always have because we arenâ€™t aware that there are other options or because we fear change and what might happen. And remember, if we continue to do the same things, we will continue to get the same results. Is that what you want? Definitely 2013 can be a great year to own rental property but only if you employ Best Practices.