How Does Real Estate Management Work?

https://capital.thebamcompanies.com/how-does-real-estate-management-work/

Table of Contents

How Real Estate & Property Management Works

Purchasing a rental real estate property can be a lucrative investment that also offers diversification. Residential real estate investing is a popular strategy among investors because there’s always a demand for houses, apartment communities, and condominiums. People always need a place to live.

Investors in residential real estate aim to generate income through rental payments from tenants. But while it is a good source of passive income, it is not truly a passive investment. This is because investors have to take on the role of landlord once they acquire a real estate property for this purpose. This title comes with a lot of responsibilities that can take up most of your time and energy.

If your goal is to generate a strong and consistent cash flow through residential real estate, real estate management is crucial. Real estate management is all about maintaining and maximizing the value of your investment property. This applies to commercial and industrial properties as well, but for this article we will be focusing on residential property management.

Real estate property management refers to the daily oversight of the investment property by a landlord or by a third-party contractor. It involves handling the day-to-day operations of the apartment community such as tenant relations, repairs, requests, renovations, financial management, rent collection, etc. [1]

Effective management ensures that assets are well-maintained, tenants are satisfied, and the investment property yields positive returns. In this article, we will talk all about real estate management and what it entails.

Key Responsibilities of Real Estate Management

Whether you decide to run the investment property yourself or hire a third party property management company, whoever is in charge will handle a lot of responsibilities. This includes screening potential tenants, collecting rent, drafting and renewing leases, handling emergencies and maintenance, arranging for necessary repairs, supervising employees, handling taxes, and marketing the property. [1]

With everything that goes into property management, we can safely say being a landlord is not for everyone. Handling a large property such as an apartment community is especially challenging if you have no experience with property management.

Successful real estate managers must possess strong interpersonal and communication skills to effectively interact with tenants. They also need a deep understanding of local real estate laws, market trends, and property values.

The job often demands a high level of organization and attention to detail to handle various administrative tasks. Property managers need to be good problem solvers as unexpected issues can arise while managing a property.

Here are some of their most important responsibilities:

Tenant Relations and Leasing

In real estate management, cultivating positive tenant relations is important. Building and maintaining strong relationships with tenants not only enhances their satisfaction but also fosters a sense of community within the property. Happy tenants tend to stay longer.

Communication plays a pivotal role in tenant relations. You need to provide timely responses to their inquiries and address their concerns. It is the landlord’s job to give them clear information on policies and procedures within the property. [2]

Some landlords keep their relationship with tenants strictly professional, while others foster stronger relationships by being good friends or neighbors. Regardless of the nature of the relationship, it needs to be solid and consistent. [2]

Additionally, a well-structured leasing process is fundamental to attracting and retaining quality tenants. This involves thorough tenant screening, transparent lease agreements, and fair negotiation practices.

By prioritizing positive tenant experiences and implementing sound leasing strategies, real estate managers can ensure a steady cash flow from their quality tenants.

Property Maintenance and Repairs

In order to keep tenants happy, you need to make sure the property is in good condition. This is why property maintenance and repairs are also crucial when it comes to real estate management.

Effective maintenance practices help preserve the physical condition and aesthetics of the building. Not only will it keep your current tenants satisfied, but it will also help attract potential buyers or lessees. [3]

Routine inspections, timely repairs, and preventative measures are key components of a successful property management strategy. Property managers know the importance of addressing common problems like plumbing, electrical issues, structural concerns, and cosmetic wear and tear.

Routine maintenance includes building walkthroughs, HVAC filter replacements, and regular cleaning. Meanwhile, reactive maintenance includes repairs for drain clogs, appliance failures, flooding, etc. [3]

Small problems can quickly escalate into major, costly issues, so being proactive can help protect your investment property. Remember that a well-maintained property is easier to market.

Market Analysis and Strategy

There are other factors that go into property management beyond tenant relations and repairs. Market analysis, strategy, and financial management are integral components of effective real estate management. These allow investors and property managers to make crucial decisions in a dynamic and competitive industry.

 A comprehensive market analysis involves evaluating current and future trends, assessing demand and supply dynamics, and understanding economic indicators that impact the real estate market.

This analysis helps identify potential opportunities and risks. It allows the property manager to create a suitable strategy based on reliable information and market insights.

A real estate market analysis should be done whether you are buying or selling a property. For residential real estate investing, a proper analysis can help you see how much you can charge for rent. [4]

When Should You Hire a Real Estate Management Company?

As we mentioned earlier, being a landlord is not for everyone. There are a lot of things that go into property management, even beyond the responsibilities we listed above. In some cases, it is better to just leave it to the experts.

Hiring a real estate management company is a good idea if you think you can be overwhelmed by the demands of property management. Working with a third-party property manager allows you to focus your time and energy on other priorities.

If property owners lack the time, expertise, or desire to handle these tasks themselves, a real estate management company can step in to alleviate the burden.

Additionally, property owners with multiple units or those who reside far from their real estate investments may benefit significantly from the professional services of a management company. Consider hiring a property manager if you have too many properties to handle yourself or don’t want to hire employees for your real estate business. [5]

Ultimately, the decision to hire a real estate management company depends on your circumstances, capabilities, and preferences.

Consider Multifamily Syndication

Real estate management is more complicated than many people think. Handling several units and tenants can be extremely difficult, especially for someone with no prior experience.

If you do not want all the headaches that come with being a landlord, but still want to enjoy the benefits of owning a multifamily real estate property, you should consider real estate syndication.

Real estate syndication is an investment strategy that allows you to participate in real estate investing without all the responsibilities that go with being a landlord.

A syndication deal involves multiple investors pooling their financial resources together to purchase a single real estate property. The most popular version of this deal is multifamily syndication, which is when you use a syndication deal to acquire a multifamily property. [6]

Multifamily properties like condominiums and apartment communities are generally larger and therefore more expensive and challenging to manage. But multifamily syndication solves both of these problems.

Since you are pooling your capital together with other real estate investors, it becomes possible to participate in larger real estate investments that are normally out of reach for the lone investor.

In a syndication deal, a syndicator, also known as the sponsor, puts the deal together and locates investors who will participate in the deal.

Becoming the general partner (GP) in the syndication deal, the syndicator takes on most of the responsibilities—and that includes property management.

Investors on the other hand become limited partners (LPs). Their only responsibility is to provide most of the capital required to purchase the property. They may also pay certain fees to get the deal going. Beyond that, they don’t have to do anything, making this a true passive investment in real estate. [6]

Investors get a share of the property’s monthly rental income in exchange for their investment. This may be distributed among investors on a monthly or quarterly basis. The profit split will be detailed in the syndication agreement or private placement memorandum (PPM) before investors decide if they want to participate.

Every deal is different, so it is important to do your due diligence before joining a syndication deal. Depending on the deal structure, investors may also earn a share of the equity upon resale.

Multifamily properties are known for their strong and predictable cash flow. They do not suffer as much from vacancies as single family properties. Even if one or two tenants leave, the cash flow does not come to a halt.

It’s worth noting that most syndication deals are exclusive to accredited investors. These are investors who pass certain criteria set by the US Securities and Exchange Commission’s (SEC). Because of their annual income, net worth, or profession, they are considered to have the financial sophistication necessary to assess unregistered securities.

If you are an accredited investor looking for a passive real estate investment, multifamily syndication may be right for you.

Work With BAM Capital for the Best Multifamily Real Estate Syndication Deals

Real estate investing can be a lucrative way to diversify your investment portfolio. But depending on the investment strategy you choose, you may have to take on the responsibilities of a landlord.

For accredited investors, or family offices there are options wherein you can enjoy a passive investment in real estate. One example is multifamily syndication. This is a passive investment because the syndicator will take care of property management. You can sit back, relax, and enjoy the fruits of your investment.

But before that, you need to choose the right syndicator to work with since they will be the ones making all the decisions in the syndication deal. It is essential to do your due diligence and choose a trustworthy syndicator.

BAM Capital is trusted by accredited investors because of its track record for excellence. This Indianapolis-based syndicator prioritizes properties that are Class A, A-, and B++, with in-place cash flow and proven upside potential. [7]

Known as an industry leader, BAM Capital uses an award-winning strategy that mitigates investor risk while creating forced appreciation. In fact, BAM Capital now has over $700 million AUM and 5,000+ units. [7]

BAM Capital is also a vertically-integrated company. This means they can handle every step of the syndication process, from acquiring the property to renovating and managing its daily operations.

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.

For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today.

Sources:

[1]: https://www.investopedia.com/terms/p/property-management.asp

[2]: https://avalonpropertymanagement.net/better-tenant-relationships

[3]: https://upkeep.com/learning/property-maintenance/

[4]: https://www.questionpro.com/blog/real-estate-market-analysis/

[5]: https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/basics/real-estate-management/

[6]: https://multifamilyrefinance.com/apartment-investing-blog/multifamily-syndication#important

[7]: https://capital.thebamcompanies.com/