Ready to find your nearest Real Property Manager? Click here!

Find a Real Property Manager

The REAL Deal - Advice, tips and trends for property owners

Reclaim Your Weekend: How Much is Your Time Worth?

Is managing your rental property yourself worth it?

Have you calculated the actual costs to see the pros and cons of self-property management?

Reclaim Your Weekend: How Much is Your Time Worth?

It’s a relaxing Saturday afternoon being spent with your friends and family at the lake, enjoying an outdoor BBQ, water skiing, and fun in the sun. You decide to check your phone and there are 3 missed calls, a text message and voicemail from your tenant describing a flooded basement from a broken water heater. You call only to listen to a now irate tenant who is dealing with property damage and an unlivable environment. After packing up and leaving your family and friends, it will take you at least an hour to get to the rental to even begin to assess the situation and repair the mess.

 

“What do I need to do first?”

“I wonder how bad the water damage really is?”

“It’s Saturday, can I get a plumber out today without costing me a fortune?”

“The carpet will probably need to be replaced, a new water heater, and what about mold?”

“Should I call my insurance company now or after I visit the property?”

“How long will this take?”

“Will I have to pay for a hotel for my tenants?”

“Do I have to replace their damaged personal property?”

“How much will this cost me?”

reclaim your weekends real property management

Could this happen to you? Do you have a similar story?

Most of the time, rental home repairs are not this serious. More common are the leaky faucets, running toilets and clogged garbage disposals, but you always have to think about the big things. Broken water heaters, broken appliances, leaking roof, a fire or even a natural disaster. Being a landlord isn’t easy, especially if you live several hours away or worse–out of state.

Reclaim your weekend How much is your time worth

 And in the middle of it all is your family and your job…AKA, your life.

Depending on your level of tolerance, the hardest part about being a landlord is the time and effort put into your rental home. Many landlords don’t factor in the value of their time when looking at the financials. It’s easy to say, “I only spent $300 on my rental this year”, but what about the time spent dealing with and handling your rental property?

 

Ask yourself these questions….

  1. Have you ever spent your Saturday at your rental property?
  2. Have you ever left work to deal with your rental property or tenant issue?
  3. Have you ever left an event or been late to an event because you were dealing with your rental property?
  4. Have you ever missed an important meeting at work because of your rental?
  5. Have you ever been late for dinner because of your rental?
  6. Have you ever missed your kid’s game, recital, or school function because of your rental?

Time away from work and family is valuable time and should have a price.

Time away from work and family causes undue stress and problems at work and home–So is it worth it?

 

If your answer is “I don’t know, but what else am I supposed to do?” or “No, but I don’t have a choice.” You may be wrong.

 

Let’s do a little math problem…

  1. Calculate the actual time you spend on and at your rental property. Be honest with yourself. Don’t forget things like phone calls, emails, paperwork, driving time, tenant screening, inspections, repairs, showing the property, and researching laws and other info.
  2. Calculate the value of your time–A good rule of thumb is to use your hourly wage or divide your annual income by 2,000 (number of work hours in a year).
  3. Multiply the total hours spent on your rental by your hourly rate.

This will give you the amount it costs you to manage your rental property. Keep in mind, this cost will rise dramatically for major repairs, natural disasters or evictions.

EXAMPLE:

Here’s How it Works Out in Real Life

Hours Spent Managing Your Rental x Your hourly rate = 

True Cost of Managing Your Rental

Let’s say you spend 5 hours a month managing your rental (60 hours a year annually). If your household income is $100,000 per year, divide that by 2000 (number of work hours in a year). That means your hourly rate is $50 an hour.

So, the average cost of managing your rental is:

$50 x 60 hours=

$3,000 a year

 

Now, calculate how much a professional property manager would cost.

The typical fee for a property manager varies by market, rental rates, and competitive conditions, but a reasonable estimate is 10% of monthly rent.  If your rent is $1,250 (about average for a typical 3 bedroom single family residence), your monthly cost would be $125, and your annual cost would be $1,500.

Returning to our example, the value of the property owner’s time was $3,000.  If the property owner’s rent is close to the average $1,250 per month, the cost of self-managing is $1,500 higher than what a professional property manager would charge.  It would make economic sense for the property owner to hire someone to do it for them.

BONUS:

The IRS does not allow property owners to deduct their time as a property expense when filing income taxes.  However, the IRS does consider professional property management fees to be legitimate property business expenses.  So, the after tax cost of professional property management is actually less than the apparent cost, which depends on your tax rate.

Do the Calculations for Yourself: The New Landlord Calculator–Do the math and find out what your time is worth, how much time and money you are actually putting into your rental property and how your time commitment compares to other landlords. Check it out here!

With a professional property manager, you could go back to that relaxing Saturday at the lake with your friends and family, and not be bothered by the broken water heater.

So, Is it really worth it?

Reclaim Your Weekend: How Much is Your Time Worth?

Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Leave a Reply

Your email address will not be published. Required fields are marked *