Property Management Cost Build-In?

Question

Hi all,

Just wondering how other investors see this information -- I am trying to purchase a property and have built in a 10% PM cost (of rent) per month. I would do this for any property.

I am planning on managing this property on my own for as long as possible (several years); so how do other investors treat this "expense" if they are managing it themselves? Do you see it as a cash flow windfall that was "unexpected but appreciated" at the end of the year? Do you actually pay yourself per month for your time? I assume most people just invest this back into the available funds for the next property, right?

I get the long term aspect -- you should build this as if you would pay someone to execute property management for you. And we should always value our own time. I get all of that...I am just trying to see what investors do with this "expense" when self-managing and how it affects the property financial analysis, how you handle that expense throughout the year, etc.

Jacob A. · Answer

@Joe Papp

I personally manage my units and I keep that money in my expenses fund for my rentals. I typically keep the 10% for Property Management expense as well as an additional 10% for all other expenses ( repairs, vacancy, etc. )

I know people who just take the 10% and put it back into their future investing and I also know some who take the approach I use. I think it is all personal preference and what you are most comfortable with.

Joe P. · Answer

@Jacob Atkinson thanks for the feedback!

Joe P. · Answer

All good here, the expense is factored in.

I'm asking what self-managed properties DO with that money set aside. If you have a property management expense of $2000 per year, but you are managing it yourself and not paying yourself, doesn't following hold true:

A) you can do whatever you want with your money (I assume most put it back into the business)

and, more importantly...

B) isn't the cash flow analysis BETTER to start with? If the financials work with the expense, but are even better self-managed, don't you use the self-managed cost to start?