Week 28: To Manage or Not To Manage?
Hello everybody and welcome back! Hope you all have been keeping safe and enjoying the transition back to work. I myself couldn't wait to get back to work as I'm one of those all or nothing type of people and thrive when I am busy. I wanted to talk to you about choosing a particular location for your strategy. Birmingham is out for me but I didn't let that derail my plans. I started looking on the outskirts and neighbouring towns etc. You don't have to be local; it's not like you're going to park outside your property and stalk your tenants. I never understood the fascination to keep your house at arms reach unless you are of course an owner occupier then in that case it makes sense. First of all you have to make some strategic decisions as to self-manage or not? Based on this you can decide on your patch. I don't really have any desire to manage my property/ies so that decision for me was easy. Yes I am going to have to pay that dreaded management fee but people lets not forget I will be keeping the other 85% so the 15% of the pie really isn't a deal breaker.
You have to know where you are heading long-term as this will enable you to make some important decisions in terms of growth and direction. My plan is to grow a decent enough portfolio, where I can get onto bigger projects as a direct result of securing funding, based on the number of properties I own. The more you can add on your books the better the finance obtained. So as growth is my main objective it made sense for me to delegate this task as I can focus on the deals and business development side of things. People often miss the point here as they think by self-managing they will be able to save a few bucks but really what they are doing is creating more ‘busyness’ (I don't know if this is a word by the way). They start penny-pinching and then miss the pounds. It's all in the numbers; It's better to part with 15% and move onto the next deal which will earn you 85% and so forth. This is how I came to my decision.
I would rather earn 1% off a hundred people's efforts than 100% of my own effort ….John D Rockefeller
I have contacted several management agents in my target area to ascertain their full list of services and to get a feel for their customer service. See how prompt they are when they talk to you and how quickly they return your messages. After all how they treat you will ultimately show how they will treat your tenants. Check out their reviews, don't be scared to ask as many questions as you like, it's your reputation on the line. If they are courteous with you they will be (well should be) professional with the tenants. Have a look at all their credentials, do they have any awards, how active are they in the community etc. All this should help you short-list then choose from the strongest candidate/agency. If you don't like any of them, get creative. Perhaps you can partner up with an agency or even buy one out or hire a lettings manager who only looks after your housing stock. But you will then become an employer and liable to pay taxes for your employees. What I am trying to say is that the sky's the limit. You can have this set-up arranged whichever way you like and this is what I have in mind for the long-term.
Tip: To pay wages will be more cost effective in the long-run than giving away a percentage for every house you obtain.