Owning/managing the property.
Now you have the property. Next step is to decide if you want to manage the property your self, or hire a property management company. If you want to manage the property your self, you should get training from your local apartment association. They have classes to help you. Also, you should read on property management. Don't just jump in and start being a land lord and not know what you are getting your self into, and what demands/requirements are needed.
If you decide the you would like to get a property management they will take 5-10% leasing commission of annual rents. I suggest that you go to and find a property management company in your area. Once you have selected a group to call, ask them the following questions (or you can go to their web site and find answers to the questions below): www.repeatproperty.com
o How long have you been in business?
o What professional designations do you hold?
o What continuing education programs do you offer your employees?
o Can you call existing clients of theirs?
o What software do you use for managing property and why?
o Can you get a sample management agreement to review?
o What costs are included in the agreement and what is extra?
o How many employees?
o Who will be the main contact? How long have they been with the company?
o What cost saving techniques do you use?
Once you find a property management company, sign them for a 120 day contract to see how they perform. Assign maintenance issue on one of three levels of importance:
1. things that have to be done
2. things that should be done
3. those things that would be nice to have done
Once you find a property management, have the both of you brainstorm and ask figure out, "If some one were to buy your property today, what changes do we think they would make in the first 60 days"?
As soon as you control the property try to get a Cost Segregation Study.
The IRS has a ruling that allows commercial-property-owners to increase the amount of accelerated depreciation allowed in a tax year. These savings extend back to property acquired after 1986, and they apply to new or future construction. They also extend to existing buildings under renovation, expansion and leasehold improvements, as well as to property about to be acquired. It can also be used for financial accounting, insurance and property tax purposes. The primary goal of a cost segregation study is to identify all construction-related costs that qualify for accelerated income tax depreciation. Cost segregation is not a tax shelter and it is not tax evasion.
To get the benefits, you must get a "study"
A cost-segregation study analyzes taxes and costs incurred to acquire, build or renovate commercial real estate. Experts/CPA's conduct these services. They break down the cost for the accelerated income-tax schedules. To qualify for a cost-segregation study, property-owners must be taxpayers or must intend to pay taxes. They must also operate as a for-profit entity.
Study costs can range from $10,000 to $100,000, depending on the property's size and complexity. In many cases, however, the benefits outweigh the fees.
These benefits of a Cost Segregation Study, can free up money used for other investments, paying down debt or making capital improvements. If you are interested in this study contact me and I will put in you touch with a credible company that can analyze your situation.
o Considerable return on investments property that do not need to be insured.
o Increased tax deductions for depreciation and reduces taxable income.
o Opportunity to correct misclassified assets and claim "catch-up" tax deductions.
o Ability to achieve faster building and acquisition cost write offs.
o Reduction in insurance costs by identifying the components of the property that do not need to be insured.
o Determine personal property versus real property for write off versus capitalization prior to construction. This allows you to write off these items opposed to capitalizing the assets. This can provide you with huge tax benefits.
o Defers taxes on capital gain amounts until the property is sold.
o Reduces real estate property taxes.
o Reduces federal income tax and increases depreciation.