How To Know If You Are Managing Your Rental Properties Efficiently On Your Own.
Overseeing 1 rental property is enough to eat up plenty of time in your schedule daily! Now, you may be great at it, or you may suffering drastically. What we want to do here in this article is help you discover whether you need help, or you’re in optimal condition by yourself to manage rental property! Let’s look at the three most important factors when dealing with a rental property and examine how you match up compared to industry expectations!
Rent Collection Percentage –
This statistic here is one that not many investors are aware of. What it does is compares your occupancy rate to your rent collection percentage. So, for example, let’s say you have 1 rental property that’s a single-family home that is rented for 12 months with no gaps (we will keep this simple so you get the picture clearly). That’s a 100% occupancy rate. The rent amount is $1,000 per month. What we need to calculate here is how much of that year’s rent ($12,000) did you collect. If you collected $11,000 out of $12,000 your rent collection percentage would equal 91.67%. While in school an A- would be quite alright, but when it comes to your rental property, we would consider this a failure. If you are collecting less than 95% of your rent roll each year you are not doing a good job!
We have seen plenty of home owners that have collection percentages in the 70 and 80 percentiles. Once we took over their percentages increased drastically! Consider this as well…if you are collecting 70% of your rent roll, and hire a management company at 8%, your rent roll should jump above 90%. This would essentially make the management company FREE compared to how you were doing on your own! Plus, you are making extra too!
Maintenance Services –
Maintenance is a pain in the neck; we know! However, it’s not something that should be skipped, neglected, or skirted around by cutting corners. Think about how you are handling your current maintenance situation. When a tenant contacts you are you immediately responding, addressing the issue permanently, and not sacrificing time away from your family, work, or well-being? If yes, then you are doing just fine! But, if you find that you are pushing maintenance down the road, telling the tenant to live with certain deficiencies, or finding it eats up all your free time (and then some) you might be throwing up a red flag without even knowing it. When it comes to your tenant’s their requests should be met as quickly and efficiently as possible. We have seen owners who paint over mold to solve the problem, put buckets under sink leaks, and even spray bleach around houses to try and get rid of insects/pests. These are all potentially dangerous band aids that are only making your problem grow bigger by the day!
Eviction Rate –
The eviction of tenants is something that you will deal with at some time whether you have a property manager or not; it just happens! What you need to keep in mind though is that your eviction rate should not be more than 5%. To put this in perspective, for every 100 tenants we place on behalf of property owners we must evict just 3 of them. So, our eviction rate is 3%. If you own a 3-family house and find that you are evicting one tenant per year that’s a high eviction rate (33%!). This, in our opinion, means that you are not properly screening tenants, and ultimately shooting yourself (and your wallet) in the foot! Not to mention, when you have unruly tenants they can cause damage, leave you with an expensive turnover, lost rent, and then a potential leasing fee for a new tenant! Evictions are your worst enemy, but with a quality property manager their screening, stature, and authority in the industry will help attract the highest caliber tenants in your market!
So if you take a step back and assess your current situation considering these 3 points you can better realize whether you are a success or a failure as a do-it-yourself landlord. If you find that you are lacking in all 3 fields it’s not the end of the world! Managing rental property is an extremely complicated, complex, and time-consuming field that we even have trouble with sometimes! Don’t be ashamed! What you can do is sit down with your closest family and friends and ask their opinions as well. When you get third party information it can help you understand your strengths and weaknesses from their point of view, and potentially help you rebound to become better on your own. If you find that it’s just too difficult, we suggest seeking out the highest rated manager in your area (on Google) and sitting down with them to see how they can improve your situation. If you come to the manager with your known weaknesses it can make the transition (and the relationship moving forward) more geared toward success. For more on this topic watch our General Manager and VP of Franchise Sales, Gregory J. Rice, discuss this in further detail. Click here!
We would love to hear your feedback on this topic! Post a comment below so we can start a discussion!
Gregory Rice is the Vice President of franchise sales for Nexus Property Management®.
Nexus Property Management® is a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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