5 Things to Consider Before Getting Involved in Property Management

So, you want to be a landlord and run investment properties? With today’s low-interest rates and rising real estate prices, getting involved in property management can be very profitable. However, it does come with a number of risks that you need to be ready to face. To make sure you’re making the right decision, here are 5 things you need to consider before getting involved in property management.

Can I Handle the Taxes?

When you’re a landlord you have to deal with all the property taxes. Sometimes this can be difficult when you have a number of properties and are not familiar with tax law. One mistake could not only cut into your monthly income, but it could also result in costly tax implications. Also, high taxes will eat into your profits. If you don’t know the first thing about tax optimization strategies, then it’s best to hire a professional property manager who does. If you don’t know what expenses to deduct or how to deduct losses, you could end up paying more in tax than you need to and that will impact your bottom line.

Do I Plan to Own Properties in More than One Area?

Owning property in more than one location can make it difficult to manage and oversee these properties. As a landlord, you need to deal with repairs and rent collection. If a tenant calls you in the middle of the night with an emergency situation, you need to act fast to resolve it. And it can be incredibly difficult to do that if you’re halfway across the country. This problem can become even more challenging if you own multiple properties in multiple locations. Fortunately, you can save yourself time and energy by hiring a property manager to handle most of these responsibilities for you.

Have I Adequately Budgeted for All Expenses?

Each investment property will come with routine expenses that are generally easy to budget for, like the mortgage and utilities, but there will also be unexpected expenses you need to estimate as well. If you’ve never put together a cash flow statement or haven’t seen a pro forma before, you might end up miscalculating key costs and capital expenditures which can result in a negative cash flow situation. If you’re not an expert, don’t take the risk. Hire a team of professionals to oversee your budget and manage your expenses.

Do I Have an Exit Strategy in Place?

Selling property can be challenging, especially if you’re trying to dispose of a rental property that has negative returns. That’s why you need to have a well-defined exit strategy in place before you become involved in property management. What are your triggers to sell? What would you do in the event of an unexpected emergency? What costs are associated with selling? Without an exit plan, you could end up holding on to assets too long in unfavourable market conditions. If you want to be successful and accumulate maximum profits, you need to have a clear understanding of how you will profit and if/when you should exit.

Do You Have the Right Financing in Place?

The financing you decide on can make a big difference in your income and return on investment. If the financing is not aligned with your goals, the loan could put a strain on your cash flow. If you want success, you need to have a financing plan in place that provides you with more freedom than restrictions. 

Investing is not for the faint of heart. If you’re considering getting involved in property management, contact our team at the Medallion Capital Group to understand more and to learn about your options.