The question that makes up the title to this article might seem a bit confusing. After all, isn’t the business of owning apartments (large or small) about having tenants and a positive cash flow? Of course it is, and that isn’t really the point. The point is that you should not have to be managing any tenants when your business is operating the correct way.
The way to get to this “tenant free” point in your own commercial real estate business is through the effective use of property managers. Managers can and should take care of the many tenant issues that have been the thorn in the side of property owners for decades. So, how do you get to this point in your own business?
It doesn’t necessarily always start out this way. Many real estate investors find it useful to start their businesses by managing at least a portion of their properties, so they develop a good feel for this side of the business. In this way, it’s not unlike a McDonald’s store owner being asked to work in the store for a while to get a good feel for the operation.
The challenge comes in letting go. Many real estate investors, through a committed work ethic, actual enjoyment in working with tenants, or just gluttony for punishment, often find it difficult to release the property management side of their business. As admirable as this may be, I also do not recommend it.
Property management is not only time consuming, but it also introduces an emotional element to real estate investing, given that you are working with real people and real life situations. I find that the best way to handle this real element of the business is to have a professional (and unbiased) third party do it for you, leaving you out of the picture when it comes to your tenants.
Call it sacrilege if you will, but I simply find this to be good business. The best form of business ownership is one where you aren’t enslaved by it, freeing up your time to relax, look for more deals, etc. Choosing a good property management company to handle each property you own can be an excellent way to accomplish this very thing.
Sure, property management is not without its own set of pitfalls, but they generally do not have to be costly to your business. In future articles, I will be discussing more the concept of selecting and managing your management team, so you can feel as comfortable as you should with letting go (at least somewhat) of this lucrative business of commercial real estate.