Managing rental property might sound like a great way to generate income. If you own a property, and you’re able to charge more in rent than you have to pay for regular expenses, you can create what’s known as a passive income stream.
In other words, you can make money on a regular basis without having to put in much time. However, there’s a misconception that property management is an utterly passive income strategy.
In reality, landlords have a few essential responsibilities to address, so you’re likely to spend at least a few hours every month on those duties. How much of a time commitment is it, though?
The Solution: A Property Management Company
If you’re hesitant about the notion of putting time into managing property, but would like to optimize your portfolio for passive income, your best bet would be to hire a property management company. These firms will handle most of your duties as a landlord on your behalf.
They’ll help you find tenants, collect rent, tackle maintenance, and even deal with evictions. You’ll pay them a percentage of your gross revenue, but that’s usually worth the cost.
Up-front Time and Effort
Initially, you’ll have to devote substantial time and energy to building your rental property portfolio.
· Choosing a new property. One of the biggest decisions you’ll make is choosing which properties to acquire. Your selection will have a dramatic impact on your potential profitability, long-term growth, and the headaches you’ll experience along the way. You might have to review many different parcels and structures, and take your time with the decision, which may require weeks or months to finalize.
· Making repairs and upgrades. Once you have a property, you may also have to invest time into covering repairs and upgrades. You may also want to do new repairs and upgrades after a tenant vacates. Depending on the nature of the property and its condition, this might only consume a few hours, but it could take weeks.
· Initial marketing. Once the property’s ready to occupy, you will market it. Setting up your marketing and advertising strategies shouldn’t take long, but some time may pass before the place gets filled.
A maxim of the industry is that a landlord must spend about 4 hours per month, for each rental property in day-to-day management.
· Tenant screening. Tenant screening typically absorbs a couple of hours for each applicant. You’ll run a credit check, a brief background check, and possibly conduct interviews. You can’t afford to skip this process, because you need dependable, trustworthy individuals to occupy your investment.
· Onboarding. Initially, you may prefer to on-board your tenants, and make sure they understand the rules of their lease agreement. Fortunately, this is a single-time expenditure of your time.
· Rent collection. Each month, you’ll have to make sure your tenants pay their rent. Automatic deductions and online portals can make the process easier, because they require very little time on your end, unless a tenant starts to miss payments.
· Property upkeep. Depending on where you live and the nature of your lease agreement, you could be responsible for basic property upkeep, such as mowing the lawn or clearing snow from the sidewalks. This could add a few hours a month.
· Maintenance requests. If and when something breaks on the property, you could be responsible for fixing it. You can usually take your time with these, but you’ll have to get to them within a week or so if you wish to keep your tenants happy.
· Emergencies. Emergencies will interrupt you at any moment, and require immediate action. Depending on the complexity of the event, this may cost you several hours.
· Warnings and conflict resolution. Problematic tenants entail warnings, and your best efforts at conflict resolution. Most tenants won’t create issues, but those rare cases will cost you several hours a month.
· Evictions. No landlord likes the idea of having to evict a tenant, but sometimes it’s necessary. Evictions can squander dozens of your hours to fully process.
The Variability Spread
There’s significant variability in how many hours landlords have to devote to their rental properties. One month, you might barely lift a finger; the next, you might surrender dozens of hours trying to deal with unexpected chaos.
A responsible, quiet tenant might cause you zero issues for years, while a reckless and untrustworthy renter generates problems for you on a weekly basis.
The big picture here is that you have to be prepared to spend time managing your property if you hope to become a successful landlord. Rental property can be lucrative, but it’s not guaranteed to be profitable, nor is it guaranteed to engender passive income.
If you wish to minimize the time you have to spend acting as a landlord, there are several strategies you can turn to, such as investing in better tenant screening, hiring help, or engaging a property management company. No matter what your goals may be, there’s a path forward.