“Resolve to pay any price or make any sacrifice to get into the top ten percent of your field. That payoff is incredible!” — Brian Tracy
One question that comes up quite often from beginning investors is, “I will be closing on an 8 unit apartment building next week. What kinds of things are important for me to know? What should I focus on as a new owner?”
I would like to take a moment and sincerely congratulate any beginning investor that has invested their time, money, and effort, and has moved forward on purchasing a good apartment property. Many people do not get to this point, so when you have accomplished this goal, give yourself a pat on the back.
OK, so now that you have closed on your first purchase, what should you focus on?
I would recommend you focus your time on two areas when getting started:
1. Property Management
One of the most important things for you to know is property management. This is really one of the most important things that you can spend your time on.
Just as in any other business, management makes the difference between a good or a bad operation – and this includes an apartment property. Bottom line is that the value of your property now and in the future will be dependent on how well you manage the property.
This means that you need to stay on top of everything and be treating your property as a business. If you treat your property as a business you will do just fine.
2. Asset Management
While most investors may have heard of property management, you may have never heard of asset management, and the distinction between the two. In a nutshell, property management is the day-to-day operations of the apartment building. Making sure that what needs to be done is completed, insurance is up-to-date, bills are paid, books are done, and apartments are running smooth.
Asset management takes a more strategic view of your investment. Asset management is focusing on making the property as profitable as possible, while maintaining everything properly. It really comes down to this; maximizing income and minimizing expenses.
Your property value is directly determined by how profitable it is. When you can reduce insurance rates by a few hundred dollars, increase the rents to full market potential, and reduce all of your other expenses, you can literally add thousands of dollars in value in a matter of months – without doing any renovations. The professional apartment investors knows that you can put thousands of dollars in your pocket simply by managing your property properly.
When a property is not managed well – that is when investors run into trouble or are surprised by something. That is when you see a decline in property value. This is not to say everything will always go well; like any other business you may have your ups and downs but if you work at it continuously you will be just fine.
The most successful investors are in the ‘treat it like a business’ mode. As long as you do the same thing you will be just as successful.