Property Management Cost Build-In?

[Joe P.]

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.]

Joe Papp

When it comes to evaluating this expense, I recommend you build the cost into your projected financials. You may very well be able to run the property management side of your business for a while, but you don’t want to be in a position where you don’t have the numbers accounted for

Personally I wouldn’t “pay myself” for managing my own properties for tax reason, but definitely have the cost factored in so when you do make the move to a property management company, the math still works on the property.

Hope this helps some.