Contractor shaking hands with property owner.

5 Key REI Relationships to Avoid Heartache

By BreAnn Stephenson

Real Estate Investing is by nature, a profession dependent upon relationships. Think about all the people you interact with in one acquisition alone: sellers, the sellers’ agent, property inspectors, settlement agents, bankers, lawyers, and the list goes on and on. Today, we will focus on five key relationships that are crucial to your investing success after you have purchased your investment property. These ongoing relationships can either pave the way to investing bliss (and profit!) or some serious heartache that could cost you everything. What are they?

Key REI Relationship #1 – Your Property Manager

Many of the losses we see occur because of an “absentee” Property Manager. If they stop monitoring your vacant property a thief may walk away with all your copper pipes and appliances, while a lack in maintenance could be the start to a major mold issue. If you manage your own properties, you might want to ask yourself “Would I hire…me?”

Heartache a Poor PM Can Cause:

  • Poor tenant selection – You don’t want just any human being that breathes living in your properties; often the wrong tenant is more costly than losing a month’s rent to find a better fit.
  • Loss of rental income – If a PM doesn’t rent your property to a qualified tenant, you could experience an inconsistency in rents coming in, which could have a big impact on your ability to grow your RE business.
  • Injury to a tenant or guest – A PM’s performance of routine maintenance is crucial as it can prevent larger property losses and potentially prevent a serious injury or even death of a tenant or a guest.
  • Property abandonment – If a Property Manager simply decides to forgo monitoring your property, the (bad) possibilities are endless. Simply put, you could lose your entire investment.

4 Benefits of a Great PM:

  • Quality tenants – A good PM has a proven strategy to get the best renters with stable rents coming in.
  • Fewer losses – You can’t prevent a hail storm, but timely maintenance can keep larger losses and unnecessary injuries from occurring on the premises.
  • Less money out of your pocket for repairs – Fewer losses, mean less repairs, which ultimately lowers overall expenses.
  • Good cashflow/profitable investment – Ultimately, a PM’s involvement should help maximize the profitability of your investment.

Read more about how to find a great PM in “5 C’s to Choosing a Quality Property Manager”

Key REI Relationship #2 – Tenants

If you have a tenant who takes care of your rental property as if it was their own, that can be an investor’s dream. On the other hand, if a tenant doesn’t take pride in their place of residence, the amount of destruction they can cause can really be shocking. With this relationship, you need a thorough screening process so you have a solid grasp on your renter’s character and rental history before they move in their sofa. It may be better to go an extra month to find the best tenant than placing someone who does not meet your qualifications and opens you up to a variety of risk.

Heartache that Problem Tenants Can Cause:

  • Lost rental income – Promises don’t equal paying rent. You don’t have to abandon your humanity, as we all know that sometimes “life happens,” but remember what your rental property is for: to produce a profit.
  • Excessive cleanup in between renters – Even if you have consistent rents coming in, how well are your renters taking care of your property? An excessive amount of clean up can slow down your ability to re-rent and could end up costing you months’-worth of rent and additional repair costs that you may not be able to recoup from your tenant.
  • Lawsuits – Lawsuits are not only costly, they are stressful and time consuming. All too often we see lawsuits involving an alleged slip-and-fall filed shortly after a tenant has been served an eviction notice.
  • Total loss of your investment – Evicted tenants may also try to get “revenge” by causing extensive damage to the home.

Benefits of Having Great Tenants:

  • Consistent rents – This may seem like a no-brainer as it is one of your chief goals: consistent, timely rents arriving in your account every month.
  • Minimal cleanup between renters – The better your tenant takes care of your property during their stay, the less you will have to replace when they leave and the longer items in the house will last. Replacing the carpet less often and not having to paint or repair drywall sure sounds nice, doesn’t it? You can also help your tenants avoid an unintentional disaster by providing them information on how to be safe in their home.
  • Less stress – For most, real estate investing is not a passive event. However, having a good tenant can make your investing life a lot less difficult, take up less of your family/personal time, and you may just get a little more sleep too.
  • More profitable investment – Consistent rent and fewer repairs are a winning cashflow combination. Ultimately, your goal is to make a profit. Great tenants are crucial in helping you achieve your number one objective!

Read more about how to find great tenants in the following articles:

“Is Your Rental Applicant a Wolf in Sheep’s Clothing?”

“Good or Bad, Your Tenant’s Past Will Impact Your Future”

Key REI Relationship #3 – Contractors

Many investors really struggle with finding a reliable contractor, and it is a common topic on many real estate blogs. We agree that it is crucial to hire skilled, reliable, licensed and insured contractors. Finding a quality contractor is key to avoiding some major pitfalls during a renovation, and you should have a thorough vetting process for them just as you do for Property Managers and tenants.

Heartache Problem Contractors Can Cause:

  • Delays in finishing your project – Time is money. Rehab work can be particularly tricky because you might find some surprises behind those one-hundred-year-old walls. That stated, experienced contractors don’t make promises beyond their abilities to secure the job.
  • Leaving the project unfinished – A nightmare scenario for sure, but we’ve seen instances where a change in GC becomes necessary, further delaying a rehab and potentially leaving the new contractor to fix the previous contractor’s “mess.”
  • Injuries on the jobsite – If a contractor doesn’t have safety in mind for their employees or subs they hire, the impact can stretch far into the future. You can get entangled in a lawsuit because an injured worker is looking for a place to lay the blame and be compensated for his/her injuries.

Benefits of Hiring Reliable Contractors:

  • A smooth repair process – Construction is never 100% smooth, but hiring an experienced contractor can minimize delays and make problem solving much easier.
  • A profitable flip – Skilled contractors can maximize your profits when they finish the job on time and without excessive surprise costs.
  • Peace of mind – An injury-free jobsite will help you as the owner sleep better at night. No fear of potential lawsuits is always a good thing!

How can you find a reliable contractor? Read more about it HERE.

Key REI Relationship #4 – Neighbors

When in it comes to the neighborhoods in which you invest, you really have everything to gain by establishing quality relationships with the other property owners and residents.

Benefits to Building Solid Relationships in Your Property’s Neighborhood:

  • More eyes on your investment – You are only one person, and even Property Managers cannot be present at all times. Less monitoring can open your investment to increased risks, especially if it’s vacant.
  • Being alerted sooner if something goes wrong – The sooner you know about your property being damaged, the more you can do to prevent further loss from occurring. Getting over to a property to dry it out after a water event could prevent costly mold damage, for example.
  • They may help you avoid a loss – Your neighbors may be able to help alert you to a hazardous condition on your property before your PM is able to or in case your tenants don’t think to.

Key REI Relationship #5 – Your Insurance Company

Though you may not talk to your insurance company as often as the other parties we’ve discussed, having a good relationship with them is key to your daily peace of mind and the protection of your assets.

Heartache that Can Result if You Don’t Maintain Good Standing with Your Insurer:

  • Increased rates – If you don’t protect your properties from avoidable losses, creating a high claims frequency or severity, your cost to insure your properties is likely to increase.
  • Loss of coverage – If you don’t abide by the responsibilities set forth in your policy, your loss may not be covered when you otherwise would have coverage available. If you have too many losses that are considered “avoidable,” your insurance company may choose to drop you as a client at renewal.
  • Insurance fraud – While we trust you are not aiming to put on a jumpsuit anytime soon, the consequences of purposely misrepresenting facts about your property to your insurer can be as severe as jail time.

Benefits to Keeping a Cooperative Relationship with Your Insurer:

  • Stable rates – While your insurer understands there are losses you can’t plan for, like a severe weather event, keeping avoidable losses such as cooking fires, burst pipes and the like to a minimum, will help you keep your rates more stable and more affordable over the course of your investing life.
  • Full use of your coverage – By abiding by your responsibilities as set forth in your insurance policy and cooperating with your insurer in the investigation of a loss, it will allow you to enjoy the benefits for which you’ve been paying your premium.
  • Access to services that help you avoid losses – Many insurance companies have departments dedicated to loss prevention. Fully participating in a relationship with your insurer means taking full advantage of all the resources and education they offer. They are best positioned to help you avoid the losses they see every day, so take advantage of their tips and save yourself headaches and money!

Timely reporting of a loss is very important to your relationship with your insurer. Read more about it HERE.

Wrap Up

From our discussion today, it is our hope that you might have a better understanding of the importance of building solid relationships with these 5 key “people” in your real estate investing life: property managers, tenants, contractors, neighbors and your insurer. In the same way as maintaining good relationships with your spouse, kids, family members and friends takes time and a little extra effort, so does nurturing these 5 crucial REI relationships. Think about what you can do to make your good REI relationships even better so you can experience greater profits and peace of mind!


How do you encourage good relationships with the 5 parties we’ve discussed today? How have you benefited from having strong relationships with your property manager, contractor, or tenant? Share your thoughts in the comments below!

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