For men and women investing and owning their first rental properties, they should heed the same advice as veteran property owners. Deferred maintenance is expensive and not keeping rents at market value means lost profits.
Real estate agent Peter Silvester of Keller Williams works with commercial properties including multiple units and he has some discovered cases of passive landlords losing out.
“There’s a four-unit building north of Los Angeles where the owner hasn’t increased rents in 20 years and he’s not maintained the property in 20 years. The building is in a quality neighborhood.”
Peter said landlords who don’t pay attention to rents may find they have to sell their properties at wholesale prices when they exit the market. “That’s because a new owner will have to spend hundreds of thousands of dollars in upgrades.”
Current property owners can benefit from a consultation and property evaluation to check the shape of the building and units and run a comparable analysis.
“Property owners who have more than one type of asset like a residential property and retail property should consider utilizing a professional to manage the assets and maximize the value.”
On the Westside, there’s an important rule of thumb to follow. “Every time a tenant moves out, which is typically every 2 to 3 years,” said Peter, “it’s important to completely upgrade the kitchens, bathrooms, and flooring. Then the return on investment is realized. If these aren’t done, you can see vacancies increase and rents go down dramatically.”
He said the cost of property management is more than made up for by the future increase in rents and the future sale price after renovation.