Time is something most of us wish we had more of - time off from work, time to relax, time to be with loved ones, time to travel, and time to pursue hobbies or creative interests. One survey found that 80 percent of adults wish to spend more time with friends or family. But work or other obligations often get in the way, leading to "time scarcity," which usually decreases happiness.
This is one reason why many people begin real estate investing. Long considered an excellent source of passive income, the real estate market is an attractive option for those who want to improve their financial situation without working more hours. In fact, one strategy is to build a cash flow from real estate investments until the investor can retire and live off that income.
The Reality of Real Estate Investing and Time
Real estate can indeed create a passive income, but sometimes investors find that it takes more time than expected, especially if they do all the work themselves. Identifying an excellent property to buy, performing due diligence, making an offer, and completing the sale can take hours or days. And that's only the first step! Once you own the property, you'll need to do the following:
- Ensure the property is ready to rent. Do you need to make any repairs or changes to meet local codes and regulations for rental properties? Do you have all applicable permits? If you aren't a legal expert, you'll probably need to hire a lawyer to avoid future problems.
- Decide how much rent to charge. This means comparing your property to similar buildings and understanding which "extras" can bring in a higher rent price. For instance, in some situations, spending a few thousand dollars on new appliances or a hot tub may mean you can get several hundred dollars more per month, an investment that will quickly pay for itself.
- Find and vet potential tenants. First, you must decide where to advertise to reach possible renters who can afford the rent you're asking for. Once you have a list, you'll compare prices to ensure you get the best deal. Finally, you'll need to review the applications you receive, run background checks, and research rental histories.
- Once you've found the right renters, they will need a rental contract. An attorney for your specific situation should draft this document.
- Now that the contracts are signed, you can relax, right? Not so fast. You'll still have obligations as the landlord (as outlined in that contract), such as maintenance, responding to requests for repairs or service, sometimes dealing with neighbor issues, collecting rent, contacting those who haven't paid rent, and, in some instances, initiating the eviction process.
- You'll also need to inspect the property every time a renter moves out - voluntarily or involuntarily - to determine if they did any damage. If so, you may be within your legal rights to withhold their security deposit - but you'll need to verify that with your legal team. When there is damage, you'll have to document it and order repairs.
If you think this sounds like a full-time job, you're not the first investor to come to that conclusion. When you're personally managing your properties, your passive income could, in fact, be very active. This situation is also impractical if you don't live close to the property.
What's the Solution to Having More Time as a Real Estate Investor?
The answer is to delegate. There is no reason you have to do all or any of the above tasks yourself. In fact, many investors tell us that hiring a property management firm like NREMG is one of the best investing decisions they have made. There are multiple benefits to outsourcing the time-consuming parts of being a real estate investor:
- A real estate brokerage can find the type of properties you're interested in and locate them for you, reducing the time you spend finding suitable investments. Their in-house legal team can also assist you with purchasing if you decide to move forward.
- Inspections and legal requirements will be handled for you, and your management firm will let you know if they recommend any upgrades to improve the property's value.
- Attracting and vetting tenants will be handled by experienced professionals who know how to read a background check and have the time to call references. Standard contracts will be provided.
- Your property manager will then handle the day-to-day operations of your properties - taking calls from tenants, ordering maintenance from third parties, negotiating for better deals with these contractors, handling tenant disputes, collecting rent, and taking legal action when necessary. They will also complete inspections and cleanings after tenants move out so that new tenants can move in as quickly as possible.
If you're a real estate investor who still handles some of the property management duties yourself, take the end of the year as an opportunity to reevaluate. Time could be the most important gift you give yourself for the coming year. To learn more about property management services, don't hesitate to get in touch with NREMG for a consultation.