Real Estate is a lucrative investment opportunity. Rental properties in particular, can offer a high rate of return to investors. Does an investor who chooses to manage his rental property have the knowledge, experience, time and resources to manage it effectively? Can an investor, who is also the property manager, provide quality service to every tenant, while maximizing the greatest profit potential on his/her investment? Put bluntly, is taking on the role of property manager worth their time?
Professional Property Manager Vs. Do-It-Yourself Property Manager
Whether a property owner chooses to manage their own property should come down to a cost analysis of their skills versus the time spent being a property manager. Additionally, an owner must identify what his time is worth.
Research shows that a do-it-yourself property manager may not realize the numerous managerial responsibilities that come with the role. He or she may also fail to consider the amount of time and effort needed to learn the new skills necessary for managing rental property. He or she may try to do all the repairs themselves, for example, without the background or skills; mistakenly thinking that this saves money. In the mean time they have spent hours trying to learn how to do the repair and may spend twice the amount of time as an experienced repairman. They may also end up needing to re-do their work which will cost even more time and money.
When tenant issues erupt, property managers need good communication and problem resolution skills. Do-it-yourself property managers may lack these abilities, normally acquired through experience working with tenants. It is unlikely that they have a reputable real estate attorney on retainer and a list of trusted, local repair technicians ready to serve their needs at the best price.
Professional property managers have the technology to maintain accurate and up-to-date records. Accounting and record keeping software will simplify and organize important information pertaining to the rental property. These tools, however, can be expensive and require additional time, effort and knowledge to use. Learning accounting software may overwhelm an inexperienced do-it-yourself property manager.
Professional property managers utilize reliable resources and have the knowledge to do complete background checks and credit checks on all rental applicants. They understand landlord-tenant laws and the Fair Housing Act. They can document the move-out and move-in condition of each rental unit using best practices.
A Cost Comparison
Recent research indicates that do-it-yourself property managers have an average annual income of $100,000. Based on 40 hours per week, their time is valued at $50 per hour. It takes about 49 hours per year to manage one property; multiplied by $50 per hour the opportunity cost is $2,450. If there are twenty rental units, this equates to an opportunity cost of $49,000 per year. These figures do not reflect or include lease violations, liabilities, emotional distress or other factors that could drastically increase the annual operating expense.
Customarily, professional property managers charge 50 percent of one month’s rent to fill a vacancy plus 10 percent each month for managing the property. If the rent is $1,000 per month, this calculates to $500 plus a $100 monthly property management fee. This figure may be low enough for a property owner to justify hiring a property management firm to handle the job.
Property management involves more than monetary costs. Property managers commit to substantial responsibilities and the output of significant time, effort and skills. Depending on the circumstances, do-it-yourself landlords may be short changing themselves and working below their pay grade.
Son-Rise Property Management is a full service property management company located in Bellingham, WA. Contact us today to see how we can help you find the perfect home to rent or manage your property.