Lessons learned owning & managing real estate (part 3)

[Satyam Mistry]

🏠 (Part 3) Lessons I have learned from owning & managing residential & commercial properties:

• There is not much you can do with some one time costs, but focus on recurring expenses & how you can either eliminate them perhaps through a one time large expenditure or reduce them.
  
  
• Pay invoices early. This gesture gives you greater credibility with your contractors & service providers. Just as we notice when renters pay early the same effect can be applied to others. This can also give you faster service in times of need.
  
  
• This is a For Profit business & every revenue stream should have profit attached to it. Take advantage of the market we are in right now as it will not last forever.
  
  
• Different people are playing different games than you. There are many different strategies, partnership structures, & exposures. A short term investor will have different metrics than a long term investor & comparing the two is not meaningful to either party.
  
  
• Unit count is fun to talk about & can give an idea of the sophistication level of another investor, but getting caught up in comparing them has little to no value. Other metrics I have found to be more meaningful are revenue, gross profit, & equity.
  
  
• Understand the importance of time when evaluating performance. It can take a few years before truly being able to see how a property performed.
  
  
• Pay yourself to replace yourself. Allocate or at least consider your fee for management or work you are doing within your businesses. This does not mean you need to draw the funds to you, but attach a dollar value to your contribution.
  
  
• Don’t get interest rate greedy. Passing on a historically good rate to get a great rate is like trying to time the market on when to buy…
  
  
• When evaluating a tenant application pay attention to the promptness & thoroughness of their replies. This has helped me to make a decision when the application may have an area of concern. The communication the tenant provides can show their commitment & responsibility.
  
  
• Consider the labor intensity it will take to run a particular property. The financial underwriting does not always take into consideration the time value of managing the asset. Managing 20 single family homes is a different process than managing a 20 unit C class property. Both can be great investments, but they will have different challenges.
  
  
• Don’t get too high or too low, expect that stuff is going to go wrong even when you are having some good months in a row.

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Would love to hear lessons and tips others have learned!