If you own more than one rental property, hiring a property manager can help boost the success of your rentals by maximizing income and minimizing rental management costs. Many landlords don’t think they can afford a property manager, and they end up trying to do everything themselves to save money. This could end up costing you more in the long run.
For example, a landlord that chooses to fix a home repair themselves runs the risk of the home sitting vacant longer or a disgruntled tenant breaking a lease. When a property manager is in charge, they work with reliable, quality professionals to get the job done in a quick and efficient manner.
Creating a budget will open the door for you to make every dollar work harder and reach your full income potential.
According to Zillow, total operating expenses for an individual property should run about 35 to 80 percent of the gross operating income (GOI). Fancier properties, like a vacation rental, will run at the higher end of that range.
The first step in creating your budget is to estimate your monthly maintenance costs. Don’t underestimate how much it costs to maintain your property. There are several formulas that will help you calculate this number, but as a general rule, the maintenance costs will be 1% of your home value. For example, $3,500 per year ($292 per month) for a home valued at $350,000.
When estimating maintenance costs, take into consideration the type of property you own. If you pay a HOA fee, what does that cover? Things like roofing, exterior paint, and HVAC repairs tend to creep up at the worst time. If you foresee a large maintenance expense, add that into your monthly budget.
Doing some upkeep and repairs will save you money here and there, but there’s a time and a place for this scenario. Plan to do your own work in between tenants. Hiring a professional provides value beyond completing repairs, saving you time and the hassle of teaching yourself how to fix something. Plus, having a professional quickly fix something shows your tenant that you respect their time and space.
Other recurring costs that should be factored into your monthly budget include insurance, taxes, HOA fees, and utilities. Once you have all the numbers, input them into a spreadsheet so you can go back to refer to it later. For each property you own, input your monthly income (the rent you charge) at the top. Then, minus each of the costs you calculated above. The remaining number is your profit that can either be reinvested into the property or used to hire a property manager.
Even if your total costs are more than your income, a property manager might still make sense for you. Often times, a property management company can help you refine some of those costs. You might be overpaying and not even know it.
Typically, a property manager collects a small percentage of the monthly rent collected, in addition to other one-time costs. Many landlords say it’s worth it. A property manager frees up your time by dealing with any tenant issues, including marketing to the right pool of potential tenants, managing contracts and other paperwork, and coordinating maintenance repairs.
If you’re in the market for a property manager, the experts at Shield Property Management are committed to boosting the success of your rental. We’ll work hard to minimize the amount of time your property sits vacant so you can maximize your earnings.
For more information on Shield Property Management’s three tiers of services, contact our team today—we look forward to working with you!Contact us