With nearly 40 years in the residential property management industry, we’ve worked with every type of investment property owner you can imagine - from accidental landlords to intentional investors and everything in between. You may be wondering if there’s a difference, or if the difference even matters. Spoiler Alert: It definitely matters!
In full transparency, it isn’t the method by which someone came to own a residential investment property that makes the difference. Whether you inherited a property, intentionally saved up money to invest in a property, or your full-time business is investing in rental property makes no difference. What matters most is your mindset.
How you think about your property, how you plan for a potential renter in your property, and how you manage that investment asset moving forward once a renter is in place, is the game changer. Let’s consider two different investors and their mindset.
Investor A locates and purchases a home in a popular area of town near A-rated schools, great shopping, and a thriving business district. His realtor assures him the area is a great draw for renters and he should have no problem finding a renter for a premium rate. But the previous owners hadn’t taken the best care of the home, so there was significant deferred maintenance present.
So, Investor A gives the place a new paint job inside and out, has it professionally cleaned, and calls it a day. After all, it’s just a rental. It doesn’t need to be in tip top shape like a new homeowner would expect. Investor A is confused by how long it takes for the property to get rented. He finally settles on an applicant that doesn’t have the best credit rating nor rental history verification, but Investor A was getting desperate to have some rent coming in. Five months later, Investor A is frustrated that his tenant habitually pays rent late, he has had to repair several appliances already, and the A/C system isn’t cooling the home well. Investor A thinks this may not be the great investment he thought it was going to be.
Now let’s try that same scenario again with Investor B.
Investor B locates and purchases a home in a popular area of town near A-rated schools, great shopping, and a thriving business district. His realtor assures him the area is a great draw for renters and he should have no problem finding a renter for a premium rate. But the previous owners hadn’t taken the best care of the home, so there was significant deferred maintenance present.
However, unlike Investor A, Investor B notes the age of the appliances and cabinetry in the home, the visible wear and tear in the flooring, and the lack of any real landscaping to add curb appeal. Investor B knows that to attract a high-quality tenant, even in this desirable area, the property will need some TLC before being put on the market. Investor B decides to replace the kitchen cabinetry and appliances, installs new flooring throughout the home, orders a new paint job inside and out, has the sprinkler system repaired, and installs a low, easy care plant border around the front of the house. The house looks fresh with good curb appeal and a brand-new kitchen when Investor B puts it on the market. Within a week, Investor B has several excellent applications to rent the property, and he feels confident in the investment moving forward.
What is the difference here? Mindset. While these two scenarios are simplified for the purposes of brevity, the sentiment and investment strategy employed are very real examples. Whenever we hear a potential client express something similar to, “Well, it’s just a rental…”, that represents a big red flag. While we always attempt to educate potential clients regarding the long-term benefits of having a well-maintained, updated property, if we conclude that we aren’t on the same page as the investor, we may choose to decline the management of the property.
The most challenging type of investor to work with is one whose mindset doesn’t match a successful outcome in this industry. They have unrealistic expectations about what a renter should tolerate, they are particularly stingy with producing funds for necessary maintenance, and they want to achieve top-of-the-market rental rates with a sub-standard property condition. Because, well, “it’s just a rental”.
While we understand that not every rental property and investor budget lends itself to a complete property overhaul, as a property management company we do have a certain standard of property condition that we expect our owners to achieve before we will market their property. This property is going to be someone’s home. They deserve a fair standard of living. While we don’t own the home, we’ve been hired to manage this asset for the owner. The owner’s decisions regarding upkeep, maintenance, and upgrades reflect on us.
Further, we know from experience that the better condition a property is in, the better quality of applicants it attracts and the faster it rents. This is directly tied to an investor’s ROI. An investor with the right mindset, who understands the need for maintaining their investment property in top condition, and willingly supports their property manager’s experienced recommendations for property enhancements, is more likely to experience long periods of uninterrupted tenancy. And that is the goal for the best return on a residential property investment. How does your investor mindset stack up?
