How to manage tenants? Every single real estate investor has at some point asked themselves the same question when thinking about how to manage rental properties. In this post, we want to give you some tips on managing tenants so your experience as a real estate investor is as positive and rewarding as possible. Let’s start with a quote:
“Stop being afraid of what could go wrong, and start being excited about what could go right” – Tony Robbins
It would appear that when you speak with people who have invested in property, you will come in contact with quite a few that have some far from pleasant tales about tenants. Many of such people have rented out their houses to difficult tenants and in the process lost some of their expected returns from these real estate investments. In some cases, they have even had to go to court to regain possession of their property.
These experiences can be quite depressing, especially in a clime like Nigeria where the tenement law appears to somewhat favor tenants. However, what should be borne in mind is that every form of investment comes with its ups and downs, and Real Estate investment is no exception.
Many potential Real Estate investors avoid getting involved in the Real Estate market or overlook lucrative real estate investment opportunities in Lagos or beyond simply because of the perceived headache associated with managing rental properties. For example, the issue of proper use of the house by a tenant, which ties into preservation and growth in property worth, and the issue of delayed or non-remittance of rent which ties into the cash flow from the investment.
One remembers receiving a call from a client who asked the question whether owning Real Estate for investment purposes (rental) was really worth it, after his tenant had failed to remit his rent on time at the first two anniversaries of the tenancy in the property, despite all the timely reminders sent to the tenant. Whilst developments such as these could be really discouraging, nevertheless when looked at especially from the point of being a store of value, the conclusion of many investment managers is that; all things being equal, there is no better investment than landed property.
Ultimately, managing rental property efficiently is part of being a property investor and property management should not be a burden for landlords.
A real estate investor can get the best from his investment by considering the following recommendations;
Hire a competent Property Manager
Hiring a property manager will only cost you between 5% -10% of the annual rent but should protect you from a lot of potential headaches. Resolving the problem of delayed or non-remittance of rent, starts by getting a skilled Property Manager. Whilst this is not foolproof, it minimizes the possibility of this risk.
A senior legal practitioner once stated that one of the best ways to guard against getting into this type of difficult situation, is by ensuring careful tenant selection. A competent property manager is not all about letting out your property in a rush, but would lay a lot of emphasis on getting in the right tenant. A competent property manager would ensure a good tenant selection process, manage tenant relations proactively, and take effective charge of maintenance/repair works coordination, rent collection and other aspects of property management that a typical property owner is not adept at.
As part of the tenant selection process, we also encourage the old-fashioned one-on-one chat with prospective tenants looking to rent a property, either by having the prospect meet with the landlord or his attorney directly or the property manager does the same as part of his duties.
Either way, it should be ensured that this is a step in the tenant selection process that is not skipped for any reason. In our experience, there have been some cases of prospects that say they are too busy to meet up with the property owner, his attorney or his property manager for a chat and seek to just pay the rent and collect the keys to the apartment. However, as one legal practitioner advised, “any prospective tenant that is too busy to have a meeting with the homeowner or his/her property manager should be ruled out immediately as this is a red flag that gives an indication of possible relations with such a tenant further down the line”. In this wise, it would appear better to lose a prospect at an early stage than to lose income from your real estate investment after the prospect has taken possession of the property.
At Beachway Homes we offer property management services to investors helping investors manage their rental properties with a wide range of services including tenant selection process and managing and collecting rental income from tenants. If you are thinking about investing in real estate but you are wondering how to manage rental property, don’t let this put you off as it is something you can easily delegate to a tenant management company.
Invest in Real Estate within a gated estate wherever possible
If you can, buying your property in a gated estate could be a very good decision. Whilst your property being in a gated estate does not prevent a tenant from owing rent, it provides some degree of comfort in the sense that a tenant cannot just opt and move out of the estate without you being aware. In well-organized gated estates, the landlord or his/her property manager will be contacted once the tenant informs them of plans to move out.
This gives the homeowner the opportunity to take necessary steps to recover any funds owed by the tenant. One must point out however that not all gated estate developments have this as part of their moving out processes, and it would be advisable to carry out a background check on the estate as well as the antecedents of the estate developer. One easy way to achieve this is by visiting their old developments or getting details from industry experts.
In conclusion, we bring to mind the words of Benjamin Graham, “Successful investing is about managing risk, not avoiding it”. As a hedge against inflation, we have found over the years that Investing in Real Estate for whatever purpose is well worth the headache that could come with it.
For more on Real Estate investment, ensure you follow this space as we seek to enlighten you so as to help you make the right Real Estate decision.
Written by Babajide Alobapost
Once the decision has been made to acquire Real Estate either for personal use or Investment, the next consideration apart from one’s budget is usually for one to determine where exactly one would like to buy. Whereas the budget available may influence whether one eventually buys the property or builds it, the decision as to geographical location tend to depend on the preferences of the prospect. In this regard, multifarious factors such as one’s primary place of work, access and availability of infrastructure, security of neighborhood, likelihood of the property locale to appreciate in value over time all tend to come into play and the interplay of considerations such as this will eventually inform a prospect’s final decision.
Beyond the decision as to the broad geographical location that one wants to buy into however, a second layer of the decision making process would be to decide whether to buy within a gated and serviced Estate or whether to buy property that satisfies one’s pre-determined criteria but is not necessarily within a serviced Estate. Based on our experience however and in line with one of our Top tips to owing your own home, our recommendation would be for a prospect to buy a property within a serviced and gated Estate. Nevertheless, we do recognise that several prsopects are sceptical of buying into serviced Estates due to what has befallen some of these kind of Estates and believe that if they are in full control of their property it would fare better. We will try to address some of the concerns they have in this regard as in the following paragraphs.
Mr. Benson lives abroad and wants to invest in Real Estate within a serviced estate in Nigeria. However, he is a little skeptical because he has heard that most serviced estates in Nigeria tend to run down over time due to poor maintenance practices and he does not want the value of his investment to depreciate as a consequence of this trend.
There is no gainsaying the fact that, all things being equal, Real Estate investment holds a lot of potential financial rewards. However, some investors are sceptical about buying Real Estate in serviced estates because of the apparent perception that there is a widespread lack of adequate property maintenance culture in Nigeria. There also seems to be an unwritten perception that many serviced estates in Nigeria run down within a relatively short period, and that this is mainly due to poor facility management/maintenance services.
Quite a number of seasoned Facility Management professionals seem to believe that the maintenance culture in Nigeria is still at a rudimentary level and this poses quite a challenge with regards to preservation of real estate value both in the public and private sector. Unfortunately, the prevailing evidence appears to support this view even though the trend is more evident with public or government-owned properties whilst privately owned and managed properties appear to fare somewhat better.
Generally, it would appear that very little premium is placed on the use and maintenance of communally-owned infrastructure and equipment by the various stakeholders but notwithstanding, there are quite a number of Real Estate developers that still maintain a high standard when it comes to provision of Facility Management/Maintenance services, thus preserving and increasing the value of real estate assets within the estates they have developed.
Having taken a cursory look at several serviced estates that have rapidly become dilapidated or are showing signs of heading in that direction, one common denominator that apparently can be discerned with such serviced estates appears to be the relatively “poor management” of such estates though it is noteworthy that there may be in addition some other hidden factors responsible for this unwelcome state of affairs.
In the light of this observation, it thus appears pertinent to pose the question; What do serviced estates that have sustained their post-construction ambience and have been able to maintain delivery of quality facility management services for many years have in common?
The right strategy and team: Serviced estates that have maintained the provision of high level services to the residents over a long period of time have done so as a result of putting in place the right long-term strategy and having the right property and facility management team to drive this strategy. No matter how sophisticated the maintenance plan, without the right team, there will likely be failures in delivery of service.
Selection of residents (buyer/tenant): As much as every developer of serviced estates desire to sell all units within their developments as quickly as possible, the more discerning developers understand the importance of proper screening of the buyer/residents that will eventually live within the estate. From experience, one key success factor in the management of serviced estates is co-operation/teamwork between the facility Managers and the residents. Getting the right mix might initially seem difficult but certainly, a considerable step in the right direction would have been made through an effective use of the screening process towards this end.
Transparency: When residents perceive that the facility managers are not being forthright, issues in the estate could degenerate to the level of non-payment of service charge, increased number of vacant apartments, litigations etc, all of which would certainly affect the Estate managers’ ability to maintain the estate adequately. Facility managers of well-managed serviced estates are well aware of this trend and thus they endeavour to maintain a visible sense of transparency and inclusiveness.
In the words of Benjamin Graham, “Successful investing is about managing risk, not avoiding it”. Investing in Real Estate within a serviced estate is generally a very good option, therefore what is essential is to eliminate or reduce the potential risks as much as possible.
For more on Real Estate investment, ensure you follow this space as we seek to enlighten you and assist you in taking the right Real Estate decisions. You can also contact us by replying to this blog if you require real estate advice.