Property investors rode a wild wave during the pandemic, with the short-term rental market stopping, then restarting, and property prices in many second-home markets soaring. What does the future hold for new second-homeowners and for managers of more robust property portfolios? We’ll explore that and more, all May long, at Inman.
Let’s face it: The traditional property investment method isn’t necessarily synonymous with a large cashflow. This is largely due to the significant upfront deposits required, as well as the mortgage costs and management fees associated with buying, rehabilitating and leasing a home. It’s a long game — and one that few people will actually succeed at.
So how can you hasten the process and ensure you will not only win at the game but profit as well? By leveraging property you don’t own. This removes the deposit requirements and often, when done right, can yield returns simply unparalleled by any other investment method.
Tens of thousands of people are already using this strategic method to earn their way to financial freedom. While the average person on the street can tackle such a venture, real estate agents have the upper hand. They know all the ins and outs of the business and how to leverage the market to work in their favor.
This is how you can get started building your property management portfolio today — and how your real estate prowess can help propel you to success.
What is rent to rent?
Put simply, the rent-to-rent property management strategy involves working with landlords to lease apartments from them to your clients. This is an ideal property management strategy for real estate agents, as it enables you to leverage your preexisting connections to the industry, your contacts and your hard-learned lessons through years on the job.
There has never been a better time to put the rent-to-rent strategy to work for you. It comes as no surprise that there are countless struggling and tired landlords and developers with too much stock and uncertainty in the current market.
By leveraging your experience in real estate, you are in the perfect position to offer them this problem-solving alternative to landlord-to-renter agreements.
Pinpoint your profit
Depending on the market in the area where you plan to begin your property management business, you will have many factors to consider when it comes to getting properties under your belt and striking deals.
James Murphy, CEO of U.K.-based Opulent Living Companies, is one of the front-runners of the rent-to-rent strategy, with over 250 high cash flowing properties in his portfolio utilizing this model. He said he got his start by building relationships with landlords and property owners directly, one of the fastest ways he’s found to build a portfolio.
“We work directly with major developers, and we provide high-level relationships to grow high cashflow property portfolios,” Murphy said. “I know loads of people building property portfolios other ways, but they’re not necessarily [promoting] cashflow.”
But even as you’re identifying these properties and landlords, and working to build the relationships, you have to keep in mind these other factors, all of which will make or break your ability to successfully begin managing properties and seeing profits.
Determine the legal structure
This is another area in which your real estate experience will come in handy. As with any venture, there’s paperwork to file, insurance to pay for and taxes to keep in mind.
If you plan on starting a property management business in the same state where your real estate license is registered, then you’re in luck! But be aware: You may also need a property management license. Do your research early so there aren’t any surprises when you’re neck-deep in your portfolio.
The profits are one thing, but business expenses are another. You’re likely aware of the myriad of expenses associated with property management, but it always bears repeating.
Although you stand to make a huge profit off of the rent-to-rent strategy, there are going to be costs associated with this victory such as:
- Legal advising and contract assistance
- Property marketing
- Customer relations
- Accounting and tax expenses
Don’t be afraid to buck tradition
The phrase “this is how we’ve always done it” is no longer acceptable, not when you have a family to support and a livelihood to ensure. When Murphy and his wife started out, it was with 5,000 pounds of their own savings and a 10,000-pound loan. Less than two years later, they’ve grown their business to 60 in-house staff members — and Murphy says it’s all because they bucked tradition.
“We pretty much followed three steps, and they’re steps anyone can take,” Murphy said. “If you work to build a property pipeline through your real estate connections, leverage a pipeline of investors, and use the systems, processes and automations you’re familiar with as a real estate agent, you’ll be able to scale your property business in no time.”
“[The rent-to-rent] method can yield 10 times the results that you get from older, more traditional methods,” he added “The language might be a new method, but I started with humble beginnings, leasing apartments from landlords and turning them into service apartments, and then after three months we were earning more than our entire combined household income. It was a wake-up call for us.”
It’s your turn for a wake-up call. Whether you plan to manage two properties or 100, there’s never been a time to leverage your experience and contacts to start a high-cashflow business in property.
By doing your research, making some calls and positioning yourself as the perfect solution to landlord’s woes, you’ll be well on your way to experiencing a business boom you’re not likely to see using any other method.