For a homeowner, the basic profit calculation every month boils down to the following simple equation.
Monthly Profit = Rental Income – (Mortgage + Expenses)
The expenses entered in this equation is mostly the costs incurred for maintenance or repairs.
What is often overlooked in this equation is factoring the expenses in terms of your time and energy spent as a landlord in managing the property on your own.
Energy spent cannot be measured but the time spent can be easily measured.
Let’s say you spend an average of 8 hours every month to manage your property including trips to your property to collect rent, regular inspections etc.
Assuming your hourly income as $26, you are spending $208 every month for self-managing your property. If you have a couple of properties or more, this cost would go even higher.
If you still think it’s right up your alley, here are the top four landlord duties you will be taking on when you self-manage your property.
This comes right at the top of the list as the need for maintenance can crop up anytime in your rental property. There is a difference in the way an owner treats his house compared to how a tenant treats the house he lives in. We’ve all been there.
Apart from the routine maintenance checks to keep the appliances at good condition, you might also have to respond to emergency maintenance requests from your tenants.
Importance: Let’s say you absolutely love your tenants. For you to retain the tenants, they have to be happy with the property. If they feel there is a delay in attending to their maintenance issues, they will start looking for a new place. This might affect your profits and mortgage payments even if the house remains vacant for just a month.
Who does it better: Property managers have a significant(unfair) advantage when it comes to maintenance and repairs as they can get great discounts from service providers as they provide the service providers with job orders every month. You can save a lot on the maintenance costs when you work with a property manager.
2. Rent collection
On the outset, the collection of rent at the start of every month sounds like a trivial issue. The major cause of any rifts between the homeowner and the tenant is a delayed rent payment.
Instead of wondering why the rent cheque has not reached your mailbox or frantically calling your tenant who is on vacation, you can automate the rent collection using new-age applications.
Importance: Importance of rental income does not require an explanation.
Who does it better: If the homeowner does not mind following up with the tenants every month on delayed rent payments, the odds are just the same for both self-managed homeowners and property managers.
3. Managing the Vacancies
A vacant rental property does not generate any revenue. As of 2018, only 4% of the rental properties are vacant in the Los Angeles – Orange County.
With limited supply and huge demand, this is great news for a homeowner as there are a lot of tenants looking for a home to rent. However, the competition is not only between the tenants but also between the homeowners (4%) in marketing their property as the best bet in the market.
Importance: When a property remains vacant for a significant period of time, the homeowner is at a disadvantage because he/she is losing money every month. Marketing a property today requires digital marketing skills too.
Who does it better: Property Managers have an edge because it is their day job and they are very comfortable in making the best use of modern day online real estate platforms. They have a huge network and they also work closely with tenants in finding them a rental property. They can play the matchmaker and get your property rented in no time.
4. Tenant Screening
Marketing a rental property is just half the job done. You will receive dozens of applications from tenants for your property. You will have to reach out to them and do your due diligence before you hand the keys to your property.
Rental Property Management takes a lot of time as you will have to perform credit checks, background history, job income, eviction history, verify previous landlord references etc.
Once you are satisfied with the above, you will need to schedule the showing with all the prospective tenants. This takes a lot of time than the above three responsibilities.
Importance: Dealing with a bad tenant can be an emotionally frustrating experience. It is always better to vet and pick a good tenant as tenant retention and renewals becomes much easier in the future.
Who does it better: If a rental property manager manages 50 rental units, he/she would have spoken to at least 300 prospective tenants to fill these rental units. This experience is invaluable, and their instincts will go a long way in picking the right cherries. As their day job is property management, they do not need to take time off for tenant showings.
The above four points are the major factors that can impact your decision of taking the self-managed route or hiring a property manager. For the extensive list of the responsibilities of a landlord/ property manager, click here.
Final questions to ponder
1. How far is my rental property?
If your rental property is far away from your home or work, you will spend a significant time commuting. Factor the time taken each way as well as the fuel costs.
2. What is the level of support you may receive from your family?
If you can divide and conquer the responsibilities of property management amongst your family members, you are one of the lucky few.
3. How much is your time worth?
Add up all the hours you will spend every month managing your property and multiplyit with your hourly income.
If the pricing quoted by the property management company is cheaper than that, it is worth choosing a property management company instead of self-management.
4. What is your ultimate financial goal?
“It is better to work on your business than work in your business”
If your ultimate goal is to attain financial freedom faster by multiplying your rental income by increasing the number of investment properties you own, you should focus on that instead of managing the properties.
When you spend a lot of time in managing a property and since it is a very demanding job, you might eventually lose interest in investing more in real estate. The time spent prevents you from working on any of your side hustles.
5. Are you a process person?
Managing your property on your own requires a lot of processes to be followed to a T. If you are not a process person, you can outsource it to the right property manager and focus on rinsing and repeating your investment journey.
At Skybridge Property Group, we make it even simpler by offering a pricing to homeowners that is unbeatable.
5.6% of your Rental Income or $98 per month (whichever is lower)
You can save a lot by choosing Skybridge Property Group instead of our competitors. We have done the research so that you that you don’t have.
Use the calculator to find out your Monthly savings in Property management costs when you work with us.