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Investing in rental property real estate: It’s not just about rents and profits

So you want to invest in rental real estate. Good Idea, it’s a great way to make money. In fact investing in income real estate affords you several opportunities that other investments do not – appreciation in value, tax benefits of depreciation, cash flow and a hedge against inflation. With today’s stock market conditions, returns from investment real estate are certainly attractive. But what about the other side of the coin? What are the pitfalls of investment property ownership, and how can you protect against them.
Horror stories of rental property management abound. Demanding tenants who are confrontational and ready to sue at a moment’s notice. Maintenance calls at 2 a.m. Myriad regulations from local building codes to Federal Fair Housing Laws. Contractors that don’t show up or do a lousy job. Employees who make poor decisions, don’t follow through and can’t be trusted. Sometimes it is amazing that anything works at all. Beware, expensive repairs and high turnover can quickly turn an attractive asset into a costly liability.
Whether you are just starting out by investing in a two-unit property or you are managing a large multi-family portfolio you need a systemized method to efficiently manage property to reach your goals. All too often the policies and procedures of running a multi-million dollar asset are left in the hands of relatively young, low paid and untrained front line staff. Every time a manager changes, the policies change, and that leads to a cash flow roller coaster, regulation violations, poor maintenance, and high turnover.
We know, we’ve been there. At Sunrise Management & Consulting we work toward the goals of stable, predictable cash flow and increasing the value of the asset. We have taken the collective expertise of our staff, drawing on over 100 years of property management experience, and created a systemized method for efficiently managing rental properties. It is a system that addresses the financial, regulatory, tenant, facility and staffing management of investment properties.
We have been using this system for approximately 18 months, and the results are tangible. We have been able to reduce our turnover rate to 26% on properties that had been as high as 75% per year. That translates to a savings of over $300,000 per year in turnover costs at one property alone. We have virtually eliminated our collection losses. We have increased our average occupancy by 4%, realizing over $80,000 in additional income at another property. Using the bi-annual Sunrise Rental Market Report as a benchmark, we have been outpacing market rental rate increases by 2 to 3%.
And the numbers don’t tell the whole story. It’s what goes on within the system that cannot be quantified that really makes the difference. Resident complaints are handled efficiently and effectively, increasing tenant satisfaction. Accurate and timely information allows decisions to be made so problems are resolved when they are small, not after they blow up. Our front line staff understands the how’s and why’s of real estate investing from the owner’s point of view, and act accordingly.
It’s not just collecting rents and realizing profits. In order to be successful in rental market investments you need to commit to the knowledge and management systems that ensure cash flow and asset value.
We have developed The Property Coach Program of workshops to share our system. It is designed around all day quarterly sessions for the front line staff – either the property owner if they are managing their own property, or the site manager and maintenance supervisor of larger properties. Each day is spent learning and working Property Coach Tools that assist in the creation and execution of a plan to accomplish the owner’s objectives.
If you are an investment property owner or manager who wants to achieve consistent results and higher profits, and find that you are frustrated by tenants, hassled by maintenance and stressed by staff, The Property Coach Program may be the solution you are looking for.

Jesse Holland is the president of Sunrise Management & Consulting, Albany, N.Y.

Tel: 781-878-4540 / Fax: 781-871-1853 / 800-654-4993 / nerej@rejournal.com / www.rejournal.com