The Most Important Investment to Make Before Investing in a Multi-Residential Property
Congratulations, you’ve finally decided to take the plunge—you’ve decided to become the owner and landlord of a multi-residential property!
But before you start celebrating there’s a lot that needs to be done. Knowing where to start and focusing your efforts can make the difference between a successful commercial investment and a flop.
We’ve been there—at MCRE, we’re multi-residential property owners ourselves and can tell you that our approach taken on the lastest investment was far different from the approach taken on the first.
Keep reading to learn about the most important investment you’ll make in your multi-residential property and how to ensure your investment ‘ship’ stays afloat.
The Best Investment For Your Investment
You’ve studied the market, done your research, and you may even have a mentor helping you out—what’s the next step?
When you decide to invest in a multi-residential property, what is the first thing you should choose to spend your time and effort on?
Selecting the property itself
Hiring a lawyer
Hiring an accountant
Hiring a property manager
The most common answer is A, but the correct answer is actually D!
What is a Property Manager
A property manager (PM) is basically your eyes and ear at the property as well as your representation to tenants. Your PM is your investment’s frontline and their competence and ability to deal with tenants can make or break your investment.
This is why you don’t hire a decent PM or even a good one...you hire an excellent one. Of all the professionals you’ll need to hire, put the most effort into finding the perfect PM. After a time, your PM will develop an intimate knowledge of your property that not even the most competent lawyer could hope to ascertain; with the right person as PM this knowledge could help you take your investment to heights you never thought possible, but the wrong person could sink your investment faster than the Titanic.
Choosing the Best Property Manager
How do you separate the crème-de-la-crème from a PM who is simply, meh. It’s not easy and experience plays a big role in being able to determine who will be a great fit and who won’t; if it’s your first time as a multi-residential property investor you would be well-advised to have an experienced investor help you to hire your PM.
At MCRE, we’ve been multi-residential investors for several decades and have come up with the following list of must-haves to help in your search for the perfect PM:
Demonstrates fiscal responsibility by spending money on items that have a direct correlation to tenants’ happiness and property improvement
Has an efficient system for regular and accurate reporting
Thoroughly understands the Residential Tenancies Act
Has the ability to thoroughly analyze repairs and renovations in order to efficiently identify the best course of action and recommended budget
Always available to take your call and knows what’s going on at your property
Always looking for ways to increase monthly rents
Deals effectively with tenants (especially difficult tenants) and can collect outstanding rent
Possesses a decent understanding of construction materials and can ensure renovations are visually pleasing, durable, and correctly priced
Of course, the majority of these traits are hard to ascertain in an interview, which is why checking references and performing general due diligence before hiring is important. Dig as deep as you (legally) can and if possible, speak with other owners the PM has worked for.
In our case, we found situational-based interview questions the most effective in determining future performance and also, this type of question gives candidates with less experience a chance to showcase their problem-solving skills.
While experience is important, more experience doesn’t necessarily equate to a better hire; often, it can be beneficial to hire someone new to the profession as they bring a fresh perspective.
The Bottom Line on Property Management
Above all else, ensure you have absolute, unwavering faith that your PM will act in your best interests. Remember, your PM is essentially acting on your behalf and how well—or poorly—he or she performs is directly correlated to how your investment will perform.
The PM is the captain of your investment ship; an excellent one will keep you off the shoals in the safety of the main channel.
Hire carefully and compensate accordingly—you don’t want to go through all the trouble of hiring the perfect PM only to have him or her leave shortly after because you wanted a get a deal on salary.