There are two very important components of a cash flow Arizona investment property opportunity; purchasing the right property and effective management. Let’s take a look at the management piece, which some investors may argue is more important than finding the perfect property. At the end of the day, how the property is managed will directly impact the return on investment (ROI). A property is either managed by the investor or by a professional property management company.
Investor Managed – A management option where the investor has complete control of managing their cash flow investment property. The investor would market the property to potential tenants, review and screen rental applicants, collect monthly rent payments, deal with past due rents, etc. The benefits of the investor managing their own property would be having complete control and not having the additional property management expense. Some of the disadvantages would include minimal marketing resources, inadequate screening of applicants, and having to deal with tenants delinquent on their rent. In the case where an eviction is needed, an investor may not be knowledgeable of the process and may be required to seek high-priced legal advice. Although there is no property management fee with this option, there could be additional unforeseen costs associated with finding the right tenant. These costs could have a negative impact on the ROI.
Effective management equals higher returns for Arizona investment property
Professionally Managed – A management option where the investor hires a property management company to deal with the operations of the investment property. The property management company would deal with marketing, screening applicants, collecting rents, dealing with delinquent tenants, etc. The investor still is involved in making decisions on many aspects of the management process; however the execution is left up to the professionals. The benefits of this option would include more resources allocated to marketing the property, more adequate screening of applicants, and a system in place to collect rents and deal with delinquency. Also, the property management company may offer additional services in regards to property upkeep. Some of the disadvantages would be that the property management company charges a fee for their services and requires a contractual agreement (which could lock in the investor for a set amount of time). Although there is a property management fee associated with this option, it is a known expense which can be taken into account when looking for the right opportunity.
I was recently faced with this decision on a rental property I own in the beautiful state of Minnesota. Being that my primary place of residency is Arizona, I had a decision to make on how to effectively manage my property. I chose to use the investor managed option and take care of the property from a distance. It worked out okay for the first couple years, but after 10 months of dealing with a nightmare tenant I chose to bring in the professionals. I recently hired a property management company and it has really taken a load off of my shoulders. There is additional expense; however I feel the services they provide are worth the cost.
How you choose to manage your investment property really depends on your overall investment strategy. Both options have the potential to create a profitable cash flow investment. Learn more about cash flow and the advantages investors have with Arizona investment property.
