Buying an investment property has become the latest hot trend, as economists and experts examining the market have found that the real estate market is the safest place to invest, and yields much higher profitability than the interest rates offered by banks or other investment channels, while at the same time having the lowest risk factor. The explanation for this is simple, and lies in the matter of supply and demand – land is the only product which cannot be produced, and mankind will be forced to share the existing land from now until the end of time. Naturally, when the production process stops, demand rises and prices rise accordingly. However, the acquisition of an investment property also requires taking steps to turn it into an active investment, and necessitates ongoing involvement and responsibility, which leads some investors away from the real estate market in search of investments which will yield solely passive profits.
For this reason, asset management companies were created in the market, and they carry out all of the necessary work in place of the property owner – from the advertising stage and finding tenants, all the way through handling tenants’ needs and the property owner’s responsibility towards them. Asset management is a profession which was born into the real estate market out of necessity, and it guarantees real estate investors passive investment as well as peace of mind, and a monthly check deposited in the bank without the worries and hassles which normally accompany renting out a property.
What are the responsibilities of a property management company?
Finding tenants – whether the property is residential or an office, lease agreements are limited in time (usually between one and two years), and a few months before the expiration of the contract it is worthwhile to find new tenants who will ensure the continued profitability of the property. An asset management company will ensure that the property is advertised in the relevant media, will present it to potential tenants, and will handle the negotiations until the deal is closed.
Maintenance services – It is the responsibility of the property owner to maintain the property in good order. Malfunctions in the systems of the property are the responsibility of the landlord and the landlord is obligated to fix them within a reasonable period of time as defined by law and / or within the rental agreement. A property management company will release the property owner from this responsibility by both carrying out ongoing maintenance of the property (inspections of the property when changing tenants and upgrading the appearance of the property) as well as addressing and handling tenants’ needs during the rental period.
Rent collection – one of the worst aspects of the real estate market is the low payment ethic among some tenants, alongside operational problems which may arise, such as real distress among tenants. Israeli law protects tenants against forced eviction, and an apartment owner may find himself without income for months, without having any immediate and practical tools to deal with the problem. Managing the property through an asset management company will remove this concern from the property owner, since the full responsibility for the actual collection and transfer of rent money to the landlord lies with the management company. In fact, the landlord has no contact – either personal or financial – with the tenant.
Supervision of the use of the property – the rental of a property for unlawful purposes, or for uses which may cause environmental nuisance are the legal responsibility of the landlord. Working with a property management company ensures that the purpose of the rental is backed up by a strong and reliable rental agreement, and will be subject to ongoing supervision by the company, which protects the rights of the landlord and his legal interests.