Tuesday, May 28, 2024

What Good Property Managers Bring: Enhanced rental property total return on investment (ROI)


As a Howard County rental property owner/investor, your major goal is likely to be building wealth through real estate. In partnership with experienced property management companies in Howard County MD, a portfolio of rental property assets can guarantee investors a steady stream of income. However, long-term wealth requires more than just an “annuity” approach – it also requires generating long-term capital appreciation.  Without good property management practices in place, rental property owners may not achieve their wealth accumulation goals.

The Math Behind ROI

To understand how working through a reputed Howard County property management company can help build you wealth, let’s understand the math behind successful wealth building strategies. As an investor in rental property, it’s often tempting to think in terms of “purchase price” and “sale price” as a wealth builder. It’s not! That’s because price appreciation is critical to building long-term wealth, but it isn’t the only factor in calculating total wealth-building potential of a rental property investment.

As we see, from the simulated scenarios above, the total return of an 18.18% price appreciation over time (Property#1), produces less total return than a property that yields only 11.76% return (Property#2) upon its sale. We can also see that, even with a -2.78% loss on sale (Property#3), the investor still managed to achieve the highest (47.22%) total ROI among the three properties in the portfolio.

The key to sustained wealth accumulation through rental real estate, therefore, isn’t about buying low and selling high. It’s about how you manage those properties to deliver total returns over time – and the rent-generation power of your property is critical to accomplishing that. Only experienced property management companies in Howard County MD can guarantee those outcomes.

Reality Check

Using best-in-class practices, property management companies ensure your property values appreciate over time. However, as those values continue to move higher, they also ensure the rental potential of the units continue to climb. The result: Higher selling prices and higher passive income generation while you hold the properties.

Here’s a case in point: Recently, the value of homes in Howard County, MD have seen a slight decline. As a long-term property investor, that shouldn’t detract you because, over the long-term, as indicated by the All-Transactions House Price Index for Howard County, MD, your investments have added (not decreased!) your net wealth.

Today, the median gross monthly rent in Howard County is $1,716 – which is higher (by far!) than that of Maryland, and the whole of the country. In reality, if you work with seasoned property management companies in Howard County MD, you would (hypothetically) earn approximately $61,800 in total rental income over a 3-year period. That’s almost 14% return on your rental property (excluding potential future price appreciation).

Good property managers market your property. They screen tenants. They carefully maintain your property. They deal with renters and tenants. They help ensure your investments comply with local, state, and federal laws governing rental property…and much more. When put together, these services guarantee enhanced rental property total return on investment (ROI) – including long-term price appreciation.