How to Manage Real Estate
Today I’ll discuss how to manage real estate successfully. To observers of real estate who are looking from the outside in, it looks easy. As a matter of fact, it appears that landlords just collect the rent, go to the bank and let someone else pay for their rental property. The truth of the matter is that research will show it’s completely different than that.
Buying real estate is a good idea. Managing that real estate is a whole new challenge, especially when it comes to renting property.
Of course, you see the positive side. However, you see it 10 or maybe 15 years after the original purchase. That original purchase might have been $100,000, and today, wow, the property is worth $200,000 or maybe $250,000. Doesn’t that look easy?
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Inflation Bails Out Poor Property Managers
If you do some research, you will also find out that a Ford Mustang 20-years ago was only $30,000, but if you would like to buy one today it’s more like $60,000.
So what really happened? Well, inflation happened. The cost of everything went up, and your dollars aren’t worth as much.
If we do further research, we’ll find professors like Robert Shiller from Yale University have written lengthy works of what really happens with real estate prices. According to history, real estate has shown a price increase of 1% each year for 100 years.
Inflation bails out many poorly planned real estate projects, but prices do not always increase. Prices will fall as a result of economics and as a result of changes within the neighborhood.
Real Estate Property Management During Volatile Markets
I’m Ted Thomas, and I’ve been involved in a subset of traditional real estate for over 30 years.
Real estate is a marketplace, and it can be volatile. It does go up on a regular basis, but it also comes down regularly. There’s inflation in the prices and recessions in the prices too.
When interest rates go up, sales drop and real estate prices fall. If the interest rates continue to rise, real estate will experience a recession.
None of this happens instantly. Unlike the stock market, real estate is a longer cycle, but it is more devastating. For example, the cycle could be down for 3.5 or even 10 years.
Property Management Strategies
That brings me back to management which requires that you have an exit strategy. If the markets are coming down, do you plan to hold for 5-6 more years or sell and make a profit?
To understand how to manage real estate, you not only need to know the nuts and bolts, but you need to know the economics of the market. Is the market improving, or is it deteriorating?
Most amateurs or newcomer investors do not realize you make your money when you buy real estate, and you collect your profits, if there are any, when you SELL the real estate. Old school real estate buyers understand this phenomenon.
How Do You Manage Property Successfully?
Let’s talk about how to manage real estate successfully. It is going to be challenging, however, financially rewarding if you learn to manage the asset. There is a time to buy, a time to manage and hold, and there is a time to sell.
Millions of buyers are priced out of the market when interest rates rise. These buyers are forced to rent property, and too many eager renters cause the market to change. The rents go up.
The economics of management are simple. Rising rents and rising interest rates means fewer buyers.
How will you manage the asset? Will you discount the rent? The market will always tell you what to do. Obviously people waiting in line allows you to raise the rent. If advertising and marketing does not bring renters, you will lower the pricing.
Real Estate Management Lesson #1 – Avoid Negative Cash Flow
Management lesson #1 – do not buy property for rental at prices so high that the mortgage rates exceed the rental income! If the mortgage exceeds the rental income, you have negative cash flow.
Negative cash flow translates to money out of your pocket every month, and this will be a management nightmare. What happens if the property requires maintenance or the rental client moves out unexpectedly without giving notice? The mortgage has absorbed all of the cash flow, so what will you do?
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How to Manage Your First Rental Property
I’m a solutions guy. First of all, don’t buy negative cash flow properties.
If you already own a property, go to school and learn how to manage real estate. If there is no school, contact professional real estate management people, and if you can’t do that, start attending local real estate clubs and find someone with experience.
Real estate management looks easy from the outside looking in. It’s thankless hard work, and there is never enough money.
Managing Real Estate Properties During COVID-19
I prefer not to rent real estate. COVID-19 allowed the politicians to change laws to cripple landlords and bankrupt mom and pop landlords.
How did that happen? The politicians told renters they didn’t have to pay rent during COVID-19. However, they did not call the bank and say that mom and pop are not going to make the mortgage payment.
Moms and pops continue to make the payment on the mortgage, or the property goes into foreclosure.
It is all management. Manage your asset!
How Do You Get Rich in Real Estate?
30-years ago, I discovered a subset of the real estate business with the same attributes as traditional real estate except the properties are in default on taxes.
How does that work? The state legislature will not put up with non-payment of property taxes and mandates that the county treasurer must seize tax defaulted property and sell it at a public auction.
Bidding will start at very close to the amount of the back taxes, and the properties will be sold to the highest bidder at the auction. The mortgage or deed of trust loan will be deleted; it’s the law in all counties in the USA.
Most investors are surprised to find that these properties are discounted by 60% – 70% or more below the tax assessed value.
Poor management kept the property taxes from being paid, and more than likely, poor management was involved in not keeping the property occupied by an owner or a renter.
We hope you enjoyed Ted’s lesson, “How to Manage Real Estate Successfully”
Much of how to manage real estate boils down to how much you spent on your property. You make your money when you buy, not when you sell, and a large profit margin can solve a lot of issues common to property owners.
Learn how to purchase real estate for 10, 20 or 30 cents on the dollar from Ted Thomas who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
You can learn how to reap the huge rewards from tax lien and tax defaulted property investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!