You Just Bought Your First Property, Now What? by Ken McElroy

You Just Bought Your First Property, Now What?

Finding Your Team and Starting Off Strong

What happens after you’ve invested in the right property? Everyone likes to write about the exciting part: finding the investment. But no one likes to talk about managing the investment.

I’ve seen amazing deals quickly go from million-dollar assets to worthless. Why? Because in order to be a successful real estate investor, the first rule is to remember that real estate values are based on performance, not on the asset itself.

That is why management is such a key component to any real estate portfolio. Once you close a deal, your property manager becomes the most essential member of your team.

To be successful and build value, I’ve laid out some ideas to consider when finding the right property management team.

Investigate

I tell everyone that before they purchase a property, that they should conduct a thorough due diligence on their investment.

This entails digging into the financials, scrutinizing every lease, and walking the entire property, every unit if you have to.

The same due diligence applies when choosing a team. It sounds crazy but get a list and interview the existing clients of the management company in question. Do they like the service they receive? Have there been any obvious mistakes you should be concerned about? Ask them how the management company has increased the value of their property.

I sometimes go as far as interviewing the employees of the company. Make sure they are upbeat, knowledgeable, and a good fit for your personality. You will have to interact with these people on a continual basis, so you better make sure they are a good fit.

Know the “Right Fit” for your Business

There are an overwhelming number of management companies out there, each with their own forte. Some specialize in commercial property management, while others specialize in residential apartments. There are some companies that are better suited for large properties while others are good for smaller properties.

The point I’m trying to make is even if you do find a good management company, they might not be good for you and your needs. You could find a management company that is awesome at what they do, but isn’t a good fit for your specific needs and situation.

Accept Teamwork

Don’t let the traditional school system fool you, business and investing are a team sport. We’re taught that working in teams and helping each other succeed is “cheating” in school. But anyone in business will tell you, everything is a team sport if you want to succeed.

That’s why finding the right team is important. Find people who are knowledgeable about the industry or who are willing to learn, who have the right personality for your team, and who are ready to work hard to make accomplishments.

All Good Things Come with a Cost

You’ve probably heard of the saying, “You get what you pay for”. People like to cut corners on some things to save money. That might be acceptable when you are grocery shopping and you decide to go for the store brand instead of the name brand. But in business, it’s not that simple. I know some investors that get a killer deal on their properties and then balk at the fees a management company charges. This goes back to investigating; management fees vary by market and property type and size.

Every good investment, if it is managed correctly, will cost you money. The beauty of property management is that you at least know what the fee is up front. Often times, with investments like mutual funds and stocks, the fees are hidden (and substantial) so you don’t see them. But with property management, the fees should be clearly explained and spelled out up front. I guarantee that if you find a good company, it will be worth its fees.

Nothing is more important to the success of your investment than good, knowledgeable property management. Whether you manage your property yourself, or have someone else do it for you, don’t try to cut corners. It always leads to disaster and heart ache.

But today’s good news is now you know what to look for. And if you currently have investments that aren’t being properly managed, you’ll have some ideas on finding the solution.

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