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Personally, I think real estate is a good investment or I would not be in the industry, but it does come with a caveat. Real estate is not a passive investment.

Many people I encounter feel that once the investment is made you can just sit back and enjoy the income. This is simply not true. If an investor is doing this then I can almost guarantee they are not making the returns that they could make or they are sitting on a ticking time bomb that they are unaware of.

What do I mean by real estate not being passive? It means that an investment in real estate should be managed by either the landlord directly or by a professional third party management company. It should definitely not be left in the hands of a caretaker only.

If you do self-manage, at a minimum you should:

• Ensure that all your step up rents for commercial tenants are current and being paid. For your residential tenants, ensure that all rent increases are current and the building is at market rents.
• Annually reconcile your actual expenses with budgeted expenses in order to calculate recoveries for your commercial tenants.
• Ensure your commercial tenants are in compliance with their leases in terms of insurance, fire prevention and other liability issues.
• Review your property tax assessment to determine if your taxes can be reduced.
• Conduct regular inspections of your property to ensure it is being maintained adequately.

These are just a few of the items you need to look at if you SELF MANAGE.

If you are not prepared to do this then you are simply sitting on a time bomb and it will come back to bite you at some time. I’ve seen it so many times. A landlord will come into my office for help but the property is in such a mess that it can take a year or two to clean it up both physically and administratively. The money needed to cover the expenses incurred would often have been more than enough to pay for the professional property management from the start.

If you feel that perhaps this is the year you would like to travel or pull back on actively managing your real estate, then perhaps it is time to talk to a professional manager.