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This is a chronic, industry-wide epidemic. There are economic realities that create and perpetuate this seemingly ubiquitous challenge and it is arduously frustrating in its consistency across markets.
It is important to understand WHY (almost) all property management companies suck and what we, as real estate investors, can do about it.
We should clarify at the outset that Maverick Investor Group does NOT offer property management services, but we do specialize in investment real estate and have helped many of our clients successfully navigate the age-old property management conundrum. We will share some of our findings, strategies, solutions and analysis here.
Property Management is the least lucrative sector of the real estate industry. Getting paid 10% of the gross monthly rent (with virtually no potential of getting paid more than that) simply does not light a fire in somebody’s pants to jump out of bed and devote their day to maximizing YOUR net operating income.
The smartest, most ambitious and talented people in the real estate game typically go into sectors that provide them the potential to make a lot more money—such as being a real estate agent, developer, or investor. Since property management is the least financially rewarding sector of the real estate industry, the least talented and least motivated people who are unable to succeed in those other sectors, tend to fall into it.
Maverick Investor Group provides our clients with access to turn-key investment properties in different markets—fully renovated single family homes with tenants and local property management already in place.
In some cases, the seller of the turn-key properties owns the property management company or is affiliated with it. In this "vertically integrated" scenario, the incentive structure is entirely different from the economics of the traditional property management company outlined above…and so typically are the results.
The property manager makes 10% of the gross rent which is $100/mo or $1,200/yr with virtually no potential to make more. Â
The seller knows that the average real estate investor buys 2 properties PER YEAR. So, if the seller can ensure (through rock star property management services) that YOUR investment property performs as well or better than expected and YOUR net operating income is maximized, then YOU are statistically likely to buy a property every 6 months.Â
That means the seller is likely to net an average of $20,000 a year PER CLIENT on sales, plus the property management fees on those two properties ($1,200 x 2 properties = $2,400) for a total of $22,400 a year PER CLIENT on average.
The turn-key scenario HAS THE POTENTIAL to generate over 18 times more income than the traditional property management scenario, BUT ONLY IF the property performs as well or better than expected.
So, the lynchpin to making $22,400 per client instead of $1,200 per client is delivering rock star property management services to make sure that YOUR net operating income is maximized.
How is that for an incentive for someone to get out of bed in the morning and make sure that your property performs?
We are not legal, tax, or financial professionals. The content on this page is for informational purposes only and should not be construed as individualized advice. It is your duty to consult with your own tax, legal and financial professionals about your individual situation, applicable laws, and the suitability of any investment property for you personally. All real estate investing involves risks, which buyer assumes, and no specific returns can ever be guaranteed by anyone.
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