Costs. Value. Mindset. A guide for Landlords in Abu Dhabi
Dear LinkedIn community, today, I want to address a crucial question that often lingers in the minds of landlords, especially those exploring the potential of property management. In my recent experience talking to one, let's use 'Mike' as an alias. Mike posed a thought-provoking question about the additional expense of hiring a property manager and the typical costs involved. Let's have a look at some of the complexities of this topic and find ways how to navigate them carefully and touch on some of the mindsets that need to be in place in order to better understand them.
The Myth of Cost vs. Value:
Mike's concern is one that resonates with many landlords here in Abu Dhabi. The perception of property management as an 'added expense' needs to be reframed. I am a staunch advocate of property management, and here's why: when you bypass professional management, you inadvertently create another job for yourself. The ultimate question to ask here is, what kind of life do you want? If the goal is financial freedom, passive income, and the creation of performing assets, then property management is not an expense but an investment in your quality of life.
The Business Mindset:
In the realm of real estate investing, we emphasize treating your venture as a business from the outset. It's not just about managing a property; it's about managing a business. To do this correctly requires skill, infrastructure, and a comprehensive approach. Hiring a property manager with a minimum of five years of experience is essential. Look for those who utilize cutting-edge software for tenant communication, robust screening processes, and systems to handle maintenance requests promptly, even if they occur at 2 in the morning.
Scaling for Long-Term Success:
Managing a single property independently might seem manageable, but what about the second, third, fourth, or fifth property? The allure of handling it all yourself can quickly lead to scaling issues, turning your investment into another business—one that could become overwhelming, especially when faced with challenges like bad tenants.
Navigating the Costs:
Now, let's delve into the financial aspect. At Transparent, where we specialize in residential property management and maintenance, we've found that property management fees typically falls within the range of 3 to 8 percent. This cost is a rule of thumb, factored into the internal rate of return (IRR). Whether you choose to manage properties yourself or collaborate with a professional, the IRR should be your guiding metric. To know more about IRR, click the link below.
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Understanding Internal Rate of Return (IRR):
The IRR is the compass in your real estate journey. It accounts for financing, community fees, rent, and, crucially, property management costs. It provides a holistic view of your investment's performance.
Dispelling the Myth of the "Tired Landlord":
Have you ever heard the term "tired landlord"? This often describes seasoned property owners who managed their properties themselves and eventually grew weary of the challenges. The essence of real estate investment is to create hands-off passive income. Think about this, if your investments are strategically structured, there's no reason for exhaustion. Managing properties yourself can lead to fatigue, and that's a risk best avoided.
Embracing a Strategic Approach:
To my fellow real estate enthusiasts in Abu Dhabi, landlords & investors, I urge you to consider property management not as an added burden, but as a strategic partnership. By entrusting professionals with the intricacies, you pave the way for sustained success, while avoiding common pitfalls and ensuring a seamless investment journey.
In conclusion, don't let the initial concern about costs cloud your judgment. Think of property management as a strategic investment, a crucial component of your long-term success in the world of real estate.
Want to know more if Property Management is the right fit for you? give me a call ??or send me a message on WhatsApp at +971 56 442 0883, more than happy to help!
Written by: Joshua Jamelo
Deputy Director Sales & Operations - Transparent PM