Owning income property is not for everyone. Sometimes it feels like the odds are stacked against you. Like most other life endeavors it is a good fit for some people and a nightmare for others. Sometimes a mismatch occurs due to personality, and other times it happens due to personal circumstances. For instance, a childless couple began acquiring rental fix-up properties early in their marriage. It was a shared desire to build real estate wealth, and weekends spent at Home Depot pouring over kitchen sinks and paint chips allowed them to spend time pursuing a mutual interest. Those Home Depot outings were almost romantic (okay, maybe that’s a stretch) as it was time spent together achieving a singular goal. As their family grew and their careers became more demanding, reality required an adjustment to the dream.
Enter the property manager. Fortunately, the savvy young couple purchased the assets at a reasonable price, put hours of sweat equity into home improvements and rents more than covered expenses. As their equity grew in the properties, their respective careers flourished. The arrival of children added to their time crunch; there was simply not enough time to personally attend to the demands of maintaining and leasing income property. They now enjoy the rewards of owning income property without the daily headaches of hands-on management. Yes, professional property management reduces the net profits, but for this particular couple, it was either sell the properties or employ a manager. For them, delegating allowed more time for parenting and careers, and it also permitted them to retain the income properties in their investment portfolio.
Another client in search of passive income soon discovered managing income property required too much active involvement. She began to dread her cell phone ringtone fearing it announced the arrival of another issue, late check, barking dog or backed up garbage disposal. Although she kept a sense of humor, she soon sought someone to help her with the day-to-day management. It is important to factor in management fees, even if you plan to manage the property as these two investors did. Life is always full of twists and turns, and padding the budget with management fees will fend off future financial woes in the event professional management is needed.
If you don’t mind the occasional midnight call or maneuvering your way through the steps of evictions, and have the time to attend to minor maintenance problems, managing your income property may be a good match. On the other hand, if you would prefer to leave those tasks to a professional, include a management fee to your budget before purchasing the property. If you never use it, your profit is greater. And best of all, if you do need it, it’s there waiting to be tapped. Finding the right balance for you is key to a successful landlord experience.