Should You Manage Your Property Yourself?
“Oh I’ll just manage it myself” said Kyle. Kyle was a smart guy. He had a good job and a great family. Kyle made a smart decision to invest in real estate. Papers were just signed to close on his second investment. He managed his first property with no sweat and thought the next one would be the same. All he has to do is make sure the rent comes in on time and fix repairs that the tenants contact him about, right? But Kyle wasn’t aware of his lack of expertise; he didn't know what he didn’t know. He didn’t understand that it takes much more than collecting a check to keep his investment and retirement safe. You see, Kyle’s first property was only two years old therefore he didn't receive many calls from the tenants with repair requests. But his second property was ten years old and carried some deferred maintenance, as many homes do. A ten year old home probably won’t have major issues, but they do need regular maintenance and a trained eye to prevent costly repairs down the road. Kyle is a manager at Best Buy, not a contractor or the DIY type. He doesn’t know the basic workings of his HVAC, electrical or plumbing nor does he know how to keep them in proper order. Kyle also lacked relationships with local contractors that he knew and trusted. Nor did he know of anyone he could get to show up for an HVAC repair on an blistering August Sunday when every contractor in town has 31 ac units that need repair immediately.
The first two years went by without a hitch. But then the tenants called with a wet floor in the basement on a Sunday. He immediately took a site visit and discovered it was only a small patch that was getting wet. Unsure of the cause he wet vacuumed the area and placed a dehumidifier. The tenants were told to keep an eye on it. The problem was back again upon the next rain. Eventually Kyle discovered that the gutters had been overflowing causing water to flow right along the basement wall where it was seeping through the block. The gutters hadn’t been cleaned since he bought the property, that hadn’t occurred to him. And why would it? He manages people at Best Buy. Upon further investigation mold was found crawling up the walls. Now Kyle has a significant repair job and a potentially more serious issue with the mold growth.
Kyle’s property rents for $1000 per month. By managing it himself he “saved” $1440.00 dollars over the course of one year. He spent $1136.00 dollars on water extraction, reshaping the front yard to carry the water away from the house, mold remediation, a dehumidifier, and gutter cleaning. So, let’s break this down. If we subtract the repair costs of $1136.00 dollars from the perceived savings of $1440.00 we get $304.00 dollars. That means he paid himself $304.00 dollars to manage his own property for one year. Not horrible and also not great. Let’s go further; Kyle spent a total of 29 hours keeping records, responding to calls, advertising, and fixing the water intrusion problem. Let’s take the savings of $304 dollars divided by 29 hours which equals $10.48 cents. Essentially, Kyle made $10.48 cents per hour over the course of a year so that he could manage his own property. We told you Kyle is smart. We didn't say he’s wise. Don’t be like Kyle.