Time is a commodity most of us are short on so lets discuss ways to own rental properties that take little to no time to manage.
Many people talk about rental properties as a way to build up passive income and though it can do just that – how passive is it?
When self managing a property it is obviously not 100% passive. You will field tenant phone goals and at a minimum have to coordinate with contractors and maintenance staff. Not to mention doing tenant screening and placement when you have a vacancy.
There is nothing wrong with doing any of the above items, but people with regular day jobs may not have the time for it.
So how does one invest in rental properties that take little to no time?
Property management companies handle all of the landlord work for you. To take it another level, companies exist that offer turn-key properties, thus eliminating the work of finding and acquiring cash flowing properties.
Let’s discuss both…
Regular Property Management
Companies that focus soley on property management handle all of the duties you would otherwise have to take on yourself when holding a rental property.
By hiring management you essentially become the CEO of your rental property as you are only making high level decisions and not dealing with the day to day items.
Generally you will set a threshold for maintenance expense with your property manager. For instance, you can have a policy that states any repairs costing less than $200 does not warrant a phone call and to only call for decisions with more expensive repairs.
This will cut your workload 90% because the majority of issues are the low cost maintenance as opposed to bigger ticket items that have longer shelf life.
Another example is tenant placement. They do the advertising, showings and screenings and then send you qualified candidates for the final decision. No fielding phone calls or showing the property is needed on your end.
Turn Key Operators
Turn key operations offer the same thing as property management companies. However, they also take care of the process of researching and finding rental properties.
Turn key operators acquire properties, have the renovations done and then sell them to investors and provide the management. Since they are doing the leg work for you, you will pay a premium compared to finding a property yourself. However, the operators do offer properties at prices where the financials make sense
In the end, it is in their best interest to offer sale prices that allow the property to cash flow. They make money from the management fee year in and year out so selling you properties that lose money is a lose-lose situation.
That’s not to say there aren’t bad turn key operators out doing it though. As always, due diligence. You are paying them to do the leg work, not the homework!
The cost of property management can fluctuate a bit depending on location, size, etc. For the most part though, 10% of gross rents per month is the standard fee.
Be aware of all the fees, though. Tenant placement is a separate fee and usually runs 50-75% of a month’s rent and some charge extra fees for service calls, etc.
Make sure you ask for a full list of fees and expenses for the services they provide.
If you want to invest in rental properties, but do not have a schedule that allows for the time obligations that come with it – then these options may be right for you!
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