Like any investment, keeping your current rental, buying a new rental property or converting your current home into a rental, may seem like a leap of faith, and to some degree it is. In today’s market, given the low interest rates and record high rental rates, it is the perfect way to diversify your investments, but with rental properties, there are many moving parts that can make or break your investment.
Rental properties are versatile as you may have them for short-term or long-term investments. No matter the length, there is the deep lying concern that may linger in your subconscious: should you manage the property yourself or hire a reputable property management service to eliminate the guesswork and hassle of being a landlord? Neither decision is an easy one to make and both will have costs involved. As we have all heard before, “Time is money” and this saying definitely rings true with being a landlord. Now it is up to you to know which route is best for your present and future endeavors of being a landlord.
The Big Picture
Let’s first lay out some scenarios as well as a list of priorities that go hand in hand with owning a rental property.
- You don’t mind having your family dinner interrupted or be woken up in the middle of the night to handle of maintenance call of no heat or a water leak.
- You have the time and resources to advertise a property, conduct showings, complete the screening process, prepare a lease, execute a move-in inspection, and ready a property for a prospective tenant.
- You are wanting to expand your portfolio of rental properties in the area.
- You have one or more rental properties and live out of the city or state.
- You are working full-time or trying to enjoy the golden years of retirement while doing your best to make the most out of your rental investment.
- ***Best return on investment***
- Time on market and/or vacancy
- Rent pool and advertising reach
- Screen prospective tenants
- Getting prime rent
- Having a professional lease
- Legal services and possible evictions
- Handling tenant challenges, HOA communication and maintenance requests
- Finding trustworthy and quality vendors
- On-going property upkeep
- Collecting rents and security deposits
- Returning security deposits upon assessing possible damages
Let’s Dig Deeper
Now let’s look at some qualifying questions to make sure that you have the fair ability to get your best return on your investment if you were to manage the property yourself:
- Do I have the time to answer and take care of maintenance and tenant challenges?
- Am I willing to answer after hour maintenance emergency calls?
- Do I have the skills to handle most common maintenance requests? If not, do I know trustworthy and quality vendors?
- Do I have time to advertise the property, organize showings, show the property, and screen tenants effectively in order to acquire qualified tenants, appease current tenants, and keep vacant time to a minimum?
- Do I have time to manage on-going property upkeep in order to prolong the quality of the home?
- Do I have time to collect rents and manage the security deposits?
- Do I have the knowledge of HOA regulations, tenant-landlord laws, and means to keep correct records for taxes/accounting purposes?
So to keep it simple, if you fall into scenario 1 or 2, understand the pertinent priorities to owning a successful rental property and said yes to at least half of the qualifying questions, then it probably wouldn’t make sense to hire a property manager. But just in case you are curious why hiring a property manager can in fact save you money, then please, keep reading.
First you will see the typical costs of allowing a reputable property management company to manage your investment. Second you will find a condensed list of what to expect when owning a rental property. All in all, the burden of the costs can be greatly counteracted by allowing a professional to handle the burden of the expectations (along with the other great ROI benefits linked in the next paragraph).
You will usually pay:
- about 10% of the monthly rent as a management fee
- 50% of a leasing fee every time the company finds new tenants
- possibly $100-$300 misc fees per year
- Average of 1-3 days vacant time.
- Hands off experience, except for brief communication regarding maintenance items, lease renewals, and new leases.
- Remember that you will also pay for all maintenance costs, but do not hire a company that upcharges on these costs.
Here are a few examples of what you should expect when owning managing your rental investment:
- A new tenant or renewal every 1-2 years.
- Fresh paint every 2-3 years.
- New carpet every 5-7 years.
- New water heater every 10 years.
- The possibility of dealing with flood, hail, fire or tenant damage.
- The possibility of some tenants having different expectations of quality compared to yourself or previous tenants.
- In current market, rent increase every year.
Let the ROI Begin
Now how would a property management company actually become an investment and increase your ROI instead of being a liability and expense? Click here for the top 10 ways hiring a reputable property management company can save you (time and) money.
All in all, hiring a property management company may not be the best move for every landlord, but if it does make sense for you, they will be able to assist you with the balance of being rent ready without eating too much into the bottom line.
If you live in Greater Denver area, contact TJC Real Estate and Management Services for a complimentary consultation. We are unique in the industry as we are a one stop shop for real estate investors. TJC can help with the acquisition, property management, and asset management. Our goal is to create a long-term relationship that helps your asset(s) grow, as well as, provides stable, long-term ROI. We are happy to assist you on your journey to become a real estate entrepreneur and hands off landlord!
Schedule an appointment today to discuss your property management questions!
Brought to you by Sondra Lockett-Cameron, Marketing Manager for TJC Real Estate and Management Services.
TJC Real Estate & Management Services • 303.324.6988 • email@example.com
Your Neighborhood Realtors® Since 2005