Hello, property and potential property owners! Welcome to the RPM Distinguished Care blog, where we provide practical advice about property management! If you’re a return visitor, welcome back. We sincerely appreciate your support! RPM Distinguished Care specializes in managing successful rental properties in and around the Charleston area. We’re here to make your lives easier by giving you the resources you need to maximize profitability and have a successful rental property. We provide comprehensive property management services at every conceivable level. From advertising and marketing, to responding to applications, to inspecting and maintaining properties—there’s nothing we do not do. Further, we ensure tenant compliance, handle necessary evictions, and report directly back to you about revenue and profit potentials. We aim to make owning rental property as easy for you as possible, for as little money as possible. Check out the rest of our site to meet our team and discover what makes RPM Distinguished Care the best property management company in Charleston!
One of the most difficult aspects of managing rental properties is enforcing evictions when necessary. Our last post delved into the legal technicalities and standards for handling evictions in South Carolina. For what reasons can a landlord evict? How do you begin eviction proceedings? To ensure fair housing regulations are upheld and evictions are legal, a certain course of action must be followed before and after an eviction is filed. In our last article, we detailed how to determine an eviction is the best course of action, how to begin eviction proceedings, and what evidence you’ll need to successfully evict a tenant who has violated their leasing agreement. RPM Distinguished Care understands the burden enforcing an eviction can be and that’s why we handle eviction proceedings for the rental properties of our clients. From consulting with a real estate attorney to collecting past due rent, we handle everything. We offer our clients eviction protection and are always there to handle the highly-stressful process. To learn more, read our last article here!
Today, we’re here to help you clarify your own goals for your rental property! In a previous article, we acknowledged the primary goal of owning rental property is profit and we broke down how to determine the return on your initial investment. Profit can be classified as additional monthly income and increased equity over time. If we continue down the path of profit, there are many off-shoots and sideroads which lead to different types of profit and different profit goals. These types and goals can help guide a rental property owner, as well as determine how aggressive or conservative their approach to ownership should be to meet these goals. Additionally, there are goals unrelated to profit which can come to define a rental property owner’s career. When we take the time to elucidate these goals, we place ourselves in the best position to achieve them. Likewise, as a property management company, we love when our clients have a clear picture of what they want to accomplish. We’re here to help you chart your own path towards your specific goals! If you aren’t entirely sure what those goals are yet, this is the article for you. Keep reading!
Monthly Cash Flow vs Long-Term Appreciation
Now, as we mentioned, the two primary ways to accumulate wealth through owning rental properties are collecting income from monthly rent (minus what you pay to own and upkeep the property) and the steadily increasing equity of the property. These two types of profitability aren’t mutually exclusive, by any means, but there are instances in which owners have to choose which is more important to them. For example, if you purchase a home in a popular area, you’ll be able to charge a high monthly rent. This high monthly rent means you’ll enjoy a sizable addition to your monthly income. However, because the home was purchased at or above market price, you will be unable to pull money out of the investment until the home’s value rises. The house will appreciate, of course, but this process can take years. On the other hand, if you were to buy a cheaper home in a less desirable area, you would have a much smaller monthly cash flow. The monthly cash flow would serve to tide you over until you decide to sell. Thus, the bulk of your profit from this investment would be derived from this sale.
If your goals align more with the latter example, you might invest in substantial cosmetic work aimed at increasing the appraised value of the house. Likewise, you might opt for shorter lease terms, leaving the door open for you to sell every six months (instead of every year). If your goals align with the former example, you might hold onto a house for a set period of time (i.e. five, ten, fifteen years) without any thoughts of selling. Instead, you would focus on housing quality tenants, leaving the house to appreciate at its own pace and using the additional monthly income to facilitate other goals. Do you see how this initial prioritization of monthly cash flow or long-term appreciation can impact other goals you may have as a rental property owner? That’s why it is important to clarify your personal goals as soon as possible, as this will allow you to create a tiered plan conducive to fulfilling each.
Write a Business Plan
Yes, investing in rental properties is a business, and any successful business has a business plan. The plan serves to outline all goals relevant to the business venture, provide a logical basis for how these goals will be met, and specify the different operations necessary for the business to function properly. You may be thinking, I’m just one person who owns one rental property. Do I really need a business plan? Absolutely. Even if you’re not operating underneath a sole proprietorship or limited liability corporation, your rental property is a profit-generating entity. Your business plan doesn’t need to be formal or long (unless you’re using the plan to seek investment from lenders). Your business plan only needs to be clear and concise. You should seek to answer several common questions, such as: How will your rental property generate income? How do you plan to handle the operations of managing a rental property? What do you hope to accomplish in the next five years through owning a rental property?
As you answer these questions, you can break down your answers into their specific parts, clarifying certain monetary goals you may have or values you seek to abide by. During this stage, you can be quite creative. When answering the question of how you plan to handle the management of a rental property, run the numbers of investing in a property management company. Consider whether the time commitment necessary to handle tenant complaints is greater or less than the commission paid to most property management companies. Consider whether, in five years time, you still see yourself personally managing the day-to-day needs of your tenants. This is important because goals for your rental property shouldn’t revolve entirely around profitability. You should also consider the well-being of yourself and your tenants in your long-term plan.
You should dedicate a section of the plan to market analysis. The housing market, just like the rental market, is always changing. However, market reports which utilize historical data can be used to predict trends and tentatively plan for the future. Ideally, market research is something which should be completed before you purchase your rental property. In our article, ‘What to Keep in Mind When Choosing a Rental Property,’ we discussed the factors which contribute to an ideal rental property. However, if you’ve inherited a rental property or the area in which your rental property is changing significantly, you’ll want to consider this within your long-term plan.
Strategy
Strategies can only be formulated after goals, as strategies represent your ideas for the best ways to reach your goals. For example, if your goal is to keep your rental property occupied 100% of the time, your strategy may include heavy marketing and prioritizing tenant happiness. While you might’ve already been planning to market your property and do what you can to ensure tenant satisfaction, a strategy throws this vague notion into stark relief. Now, you might increase your marketing budget. Now, you might study tenant pain points or invest in a full-service property management company like RPM Distinguished Care. If your goal is to be completely hands-off and use your rental property as supplemental income, you might (again) invest in a full-service property management company like RPM Distinguished Care. Strategy is essential for reaching your desired outcome in the fastest way possible.
With any long-term goal, patience is paramount. You cannot build equity, establish excellence, or reach financial goals without patience. At RPM Distinguished Care, we work alongside our clients for however long it takes to reach their unique goals. We levy every asset at our disposal, including over thirty years of experience and a dedicated team of individuals, to be of assistance. From tenant screening to leasing to inspections to marketing—there’s nothing we do not do. We believe in full-service and comprehensive property management. That’s why we take the time to understand each of our clients and help identify their most closely-held goals. Use our website to request your free assessment and meet with our expert team! Thank you for taking the time to read this article and we hope to hear from you soon!
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