If your real estate investment business is starting to feel like a circus, it may be because you're spinning too many plates. In a way, it's good to be busy: it means you are preoccupied with managing your income, and that should be celebrated. On the other hand, no matter how smart or hard-working you are, your mind and body are finite resources; you can only juggle so much.
If you're not there yet, but you're in the process of growing your portfolio, you should plan now for when things really start to pick up! Here are some tips to help you manage a growing real estate investment portfolio. By shifting your mindset and taking some simple steps, you can avoid the three-ring circus and manage a smooth operation.
Go from Juggler to Ringmaster: Understand Opportunity Costs
If you already have a portfolio that's earning money, you have at least an experiential understanding of opportunity costs. These are the costs you incur from not doing something that could be making you money.
For example, perhaps you've had to reschedule a business appointment because you had to handle an issue with a tenant. At some point, you may have thought, "Wow, I can't believe I'm doing this when I could be out making money." That's the opportunity cost.
Some Richmond property owners, particularly those with growing portfolios, think opportunity costs don't exist for a real estate investor in Richmond. They feel everything they do is a wise expenditure of time because it helps manage the business. While the dedication and work ethic behind this mindset is admirable, they are also expensive. Every minute you spend trying to quash problems, put out fires, or answer texts from tenants could be spent adding to your portfolio.
The Challenge Inherent in a Growing Portfolio
The famous sage and poet—the late Christopher Wallace—mused, "More money, more problems." A real estate investor understands this truism first hand. Each new property you have to manage results in an exponential increase in the amount of work you have to do.
The growth of the work is literally exponential because each new property often comes with multiple tenants. While the money you earn has a pretty, parabolic curve, so do the potential challenges that come with each new tenant.
The Solution: Hire a Property Management Company
The only way to acquire more hands to juggle and more feet to wheel around is to hire people who do it for a living: property managers. The business of managing properties is something that is mastered over time. A property management company in Richmond has taken the time to figure it out, get it right, and replicate the success.
Consider this example of how a property management company can help you manage a growing real estate portfolio:
You have a lunch meeting with a wholesaler, Suzy, in Richmond at 12:30. Suzy is dependable; she always has something that's at least worth considering. You have a new tenant from a deal you closed about a month ago. He's in New Baltimore. He calls saying the refrigerator just broke down, and he's prepping for a big family dinner tomorrow. Without the fridge, dinner is going to be ruined. You then get a text from a long-time tenant in Mount Clemens named Ruben. He's saying the water heater's not working. He texts two more times, describing the problem in more detail. Your repair guy, Tom, can only be in one place at a time. It's now 12:43, and you're pulled over on the side of the road, reading the stream of texts coming from Ruben. You're halfway to Richmond to meet with Suzy. What do you do? Where do you send Tom: New Baltimore or Mount Clemens? More importantly, where do you send yourself?
With a local property management company, your phone doesn't even go off. The company handles those details for you: the only decision you have to make is whether to get the rib eye or the porterhouse.
With a property management company, you also have the leeway to decide when to be alerted about issues. If you want to be consulted about a busted fridge or water heater, you can opt for that—if not, no problem.
Their Focus Should Be Your Focus: Maximizing ROI
A property management company with years of experience in maximizing ROI on extensive portfolios can be a powerful partner. Experience is the best teacher! An experienced property management company has the knowledge and wisdom to make sure you get a strong return on your two most important investments: your money and your time.
When it comes to managing a growing real estate portfolio, you don't have time to clown around! The Richmond MI area is still booming with opportunity. With a property management company that serves Richmond, you can stop juggling and focus on running the show. With this freedom in mind, JMZ Management put together our free guide, "Real Estate Investing: Grow Your Portfolio," so you can get back to being the ringleader sooner.