You’ve heard the familiar proverb “time is money,” but what does that actually mean? Have you ever stopped to think about what the actual price of your time is? When you start assigning a dollar value to each hour of your day, you gain a ton of clarity on exactly how much your time is worth, and you may start thinking more about how your time is spent. As a rental property owner, what is the cost of your time?
Clocking in for Cash
Property management is a full-time job – and a tough one at that. Without good management, even the best properties can end up dropping in value. When you consider everything that goes into managing your own properties, assess how much time needs to be allocated to finding and screening tenants, maintaining and repairing units regularly, getting familiar with East Bay compliance laws, and resolving tenant issues. And once you start thinking about scale, be careful about spreading yourself too thin. If you compromise the level of attention you pay to acquiring the right kinds of properties and getting them in top shape for renters (), what you’re really compromising is the potential to maximize profits.Additionally, if you’re finding it fruitful to maintain just a couple of properties, and are not necessarily keen on building your portfolio, it’s still imperative to know exactly how your hours are spent. It’ll give you a better understanding of your overall capacity, which may allow you to explore other opportunities to build high net worth.
By the Numbers: An Analysis
So, how does this all play out? Let’s use a nice, round number and say your “billable” rate is $50/hour. We’ll say it took you an hour to take pictures, record a video walk-through, and list the unit on East Bay property rental sites. On top of that, a total of 14 hours across three days to respond to multiple prospects, coordinate with them to show the unit, get the lease signed, and go over leasing terms and paperwork with the new resident. Mind you,15 total hours – or $750 – to complete all of this is nothing short of a miracle. You can assume a typical property management company in East Bay would do this for about $900. It would also cost a few hundred bucks to take pictures and market the property, which means there’s a potential to perform all of these tasks at cost. That is, if we’re assuming this is how you want to spend your time and that you work like a machine. But, if you would rather focus on your primary job, spend time with family, or travel, why do the things a property manager can probably do better?It’s also important to consider the potential risks. Do you have a process for selecting your resident? Do you abide by Fair Housing? Do you even know what Fair Housing is? There are lots of major risks associated with selecting your residents – physical property damage, consistent late payments, messy evictions, etc. Is the risk worth the reward?
The Challenges of Self-Managing Rental Property
Most property investors will, at some point, take a stab at self-managing. It’s true that there are some perks to managing your own properties. You can get some hands-on experience, you don’t have to pay anyone to perform the everyday tasks associated with this business, and you have more “control” over how your properties are managed. But, how is “control” defined? For some, it might mean being across every single detail and dealing with every step of the process yourself. For others, it simply means having full transparency of the interactions that are being had with residents as well as R&M services, knowing how your properties are performing at any given time, and being well-informed. The “control” is perceived through easy access to information and the ability to remain seated in the decision-maker’s chair. Regardless, the advantages that come with self-managing a feasible number of properties can leave owners feeling like this “job” is completely sustainable – and “free.”Handling Resident Relations and Concerns While Self-Managing PropertyHowever, the pain points that are commonly felt by investors who are self-managing an ever-growing portfolio of properties easily outweigh the perks. As a self-manager, you’d have to deal with every single resident’s grievances – everything from addressing disputes between tenants to more serious issues like being told there are rodent droppings in your unit’s kitchen cabinets. You don’t have time to mitigate tenant discrepancies. Nor do you want to deal with finding and hiring expensive exterminators to rid your unit of pests, and wonder afterwards if they even did a good job. Not to mention handling messy evictions, staying on top of East Bay compliance laws for every city and county you own property, managing requests for rent payment extensions. Shall I go on?Ultimately, what makes sense to one property owner may not apply to another. Whether you decide to delegate managing your properties to experts or take it on yourself as a full-time job, evaluate what options would benefit you most when it comes to property management. You’ll have to calculate the hours spent and then ask yourself again – is it worth it? Remember, it is very common for those that self-manage to view property management as a “free” responsibility. Hopefully you are gaining a better understanding that property management is not free of cost, because your time is valuable and can be used in many different ways.
Down to the Bottom Line
What’s your real bottom line after calculating all the labor you’ve put in? As a thoughtful investor, you know the importance of tracking your time on all property management and real estate-related activities. You’ll soon realize that as you gain more experience as a property owner and your approach to property management gets more sophisticated, delegating responsibilities will create more efficiencies at scale. This is especially important if you’re planning to further develop your investment portfolio, or if you’re already doing so. The reality is that savvy investors tend to build “teams” of people and companies that do portions of the work, which allows the owner/investor to maximize their time and value.
Whether you own a property in Oakland, Hayward, Alameda, the East Bay, San Diego or Seattle, working with a local property management company can actually improve your bottom line. Property management companies typically have existing relationships with R&M service providers, which means they’re able to access those services for a better price and with a higher degree of responsiveness. You can also avoid fees associated with non-compliance issues, and save hours upon hours appointing a trusted team to manage and fill vacant units. Time really is a precious commodity, especially when you’re serious about building wealth in the most efficient ways possible.