If you’re looking to invest in real estate – or you’ve just made a real estate purchase – then it’s likely you’ve considered how you will manage your property, and with close to 900 residential managing agent firms across England and Wales, there’s lots of options to choose from.
Most often, property owners hire property managers to take care of things such as tenant selection, rent collection, ensuring property maintenance and more property-related responsibilities, allowing property owners to generate passive income without having to deal with the daily ongoings of the property themselves.
There are two main types of property management styles that owners can choose to adopt: passive and active management.
What’s the difference between passive and active property management?
Like the names suggest, passive property management takes a less intensive approach, with property managers taking the reins with regards to managing the property, while active property management is more intense and proactive, with the property owner being a lot more actively involved with each property.
In practice, this means that property owners and property managers are in regular contact – often daily – when properties are actively managed, and property owners are involved with most or all of the decisions made about the property.
Moreover, property managers typically have more responsibilities when conducting active property management as, on top of the usual responsibilities associated with passive property management – such as collecting rent and selecting tenants – they must produce frequent reports on the properties, stay knowledgeable about the market and therefore maximise the value derived from rent payments, actively market the property and more.
What are the benefits of active property management?
Properties that are actively managed can be more profitable, as active property management ensures that property owners are kept informed about their property and the market, allowing them to make informed decisions about buying and selling at the most lucrative time, as well as the rent value they should be charging their tenants.
Moreover, because of the higher potential reward associated with each property – maximising the potential of the £1 trillion market value of the residential leasehold industry, as reported by a 2019 ARMA study – it means that real estate investors won’t need as many properties in their portfolio to reap the same financial benefit, in theory, compared to if their holdings were comprised of more passively managed properties.
What are the benefits of passive property management?
The biggest benefit of owning passively managed properties is that passive income can be earned by the property owner with minimal time and effort, as most of the responsibilities associated with each property will be taken care of by property managers.
More than this, because passive property management doesn’t rely on short term market fluctuations and experience with real estate and the housing market, it’s lower risk.
Though passively managed properties may not produce quite as much income as active property management can, even inexperienced real estate investors are able to generate a reliable solid passive income.
Along the same lines, this makes passively managed properties a great option for those who are first getting into real estate investing, or have little experience or time to dedicate to their properties.
Article by Parcel Tracker,
The Creators of the AI Power Mailroom Management Software