Rental Management - Do Your Own?
Rental management fees vary around the country, and according to the property type. They can be as low as 4% of the gross rents for large properties, to as high as 12% for single family homes. Managin...
Rental management fees vary around the country, and according to the property type. They can be as low as 4% of the gross rents for large properties, to as high as 12% for single family homes. Managing your rental properties yourself can theoretically save you a lot of money, especially if you own a collection of single family rental homes.
Should you do it yourself, then? That depends on the property, and on your own long term goals. Let's look at some of the advantages and disadvantages.
Rental Management - Do It Yourself
The obvious advantage is that you save the property management fees. On a fourplex renting for $700 per unit, the fee might be as much as 10%, or $280 per month. That might be all of your cash flow or more. You could save $3360 per year by doing it yourself.
Even if you have sufficient cash flow, that $3360 makes it a safer investment, doesn't it? If the roof needs repairing, or some other surprise comes up, you would be more prepared. So there is a safety factor in doing it yourself and saving the money.
Additionally, the personal involvement means you can find cheaper ways to do things. A rental management company will just call a plumber, for example, if a toilet is clogged. You might save $80 for a minute of plunging.
Rental Management - Hire It Out
Property management companies have prospective renters coming to them weekly, so they can rent that vacant apartment out quickly. For this reason, the fee may not cost you as much as it seems. If an apartment is vacant for an extra two weeks, because you are too inexperienced and busy to get it rented quickly, that can cost you hundreds of dollars.
It may be true that doing your own rental management is safer, and you can control costs more. A job is safer too, though, and that is what you end up with. Time spent showing units, collecting rents, and plunging toilets takes away time from finding other good investments. Saving hundreds can cost you thousands in lost opportunities.
Property management companies have experience in dealing with late rent, making tenants pay for clogged drains that they caused, getting apartments ready to rent, and every aspect of the process of running a rental property. Do you? Even if you do, you have to ask yourself whether you want to invest in properties or work in them.
Buy properties that have sufficient income to cover all expenses. Include a property manager as one of those expenses when analyzing an investment. Then, when you make your investment, pay for rental management, so you can get back to investing.
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ABOUT THE AUTHOR
Copyright Steve Gillman. Visit his web site for a list of questions to ask before hiring Rental Property Management, and go to the home page for a free real estate investing course: http://www.housesunderfiftythousand.com/rental-property-management.html