What about time commitment? What is a realistic estimate of hrs/year needed to manage a single rental property?
Well, I can only tell you what we do: we only have one property that qualifies as a ‘single rental property’, one little condo in a complex of about 16 units that we do not own, near the beach …
…. and, while we live in the USA, that beach is in Melbourne, Australia!
Also, it’s my wife who manages this one, so I asked her:
It takes about 2 hours per year.
Now, we have another residential property that is a quadruplex; it’s also in Australia and my accountant takes care of that one while we are in the USA.
I checked and it takes him less than 2 hours per month … at least, that’s what he bills me for, so the whole thing probably also takes him about 2 hours per year!
Simple: we always hire property managers and get them to take care of everything:
1. Finding tenants
2. Negotiating leases
3. Handling repairs and maintenance
4. Collecting the rents
5. Paying the bills
Doesn’t it cost money?
Sure. 6% – 9% of the rental income (plus usually the first month’s rent for any replacement tenancy after a tenant leaves).
Would it be cheaper doing it ourselves? Of course: we could ‘pay ourselves’ that 6% to 9%, but then:
1. We would eventually suffer burnout. It can be very stressful handling retail tenants.
2. We would be trading (our) time for money.
Trading time for money is exactly the wrong way of looking at it: time is a finite resource; money is an infinite resource, why trade the finite one for the infinite one?
In other words, they keep printing money, but nobody is giving away more time.
So, every time that I can find an opportunity to ‘buy’ time with my money that’s exactly what I will do.
It’s why I give my shirts to the dry cleaners; my mowing to the landscapers; and my property management to the experts. It’s why I outsource practically everything to do with my investments, too – except picking the investments themselves, or managing any issues to do with risk.
If I didn’t outsource my property management, I would eventually stop buying real-estate because every property that I bought would add to my workload, and who wants to do anything that makes you have to work harder? And, I would eventually get what Dave Lindahl calls “tenant burnout” …
So, I may lower my return on each property somewhat, but I reinvest the ‘saved time’ into purchasing more investments … the whole shebang is much greater than the parts.
Outsourcing is a great way to leverage your time. I have a similar situation to yours with a couple of properties overseas under management. So long as you have a reliable and honest manager who is fully transparent on costs I regard the expense as being good value for money spent.
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A lot of bloggers seem to have problems with their property managers. A lot also seem to find out that property is a much harder investment than the gurus make out. But if you buy and hold and outsource most things to competent people it could work out very well.
@ Trainee – It’s time that you promoted yourself to ExpertInvestor! Either that, or I’m also still a ‘trainee’ … we seem to see things eye-to eye 🙂
@ Moom – people need to treat real-estate (even buy/hold) as a business … albeit one with a lower-than-average time requirement, but it requires at least SOME time and effort, nonetheless.
Thank you for answering my question! Since I think I could manage a 2 hr/year time commitment, this post gives me some interesting follow up questions;
#1> How do you screen property managers?
#2> What is the minimum practical amount of capitol to start real-estate investing?
@ Rick – Best resource for #1 is this book – even though the title says “multi-family” you will find it just as useful for single-family houses or condo’s [I don’t make ANY money, or earn ANY commissions for ANY products or books that I recommend on this site]:
As to # 2: $0 … and, here is an oldie-but-goodie book that explains how:
If you don’t want to try ‘no money down’, stand by for a f/u post ….
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