My fellow landlord invited me to help him with his units in Chicago as he has more than 100 units and managing them became a full-time job for him. It is not something the Landlord expected to be busy with.
I am exploring how to make this process more efficient. I have an idea to get some help from property managers. After several meetings with potential property managers, I am a bit discouraged to learn of the reality and make some financial calculations.
- I have got an idea of the general expenses of a landlord for PM`s help:
- 1 full month rent cost when PM to lease it
- 3-5 weeks to rent a property (1 month's rent lost on vacation)
- 10% of the monthly rent to "manage" it... essentially collect the rent
By these calculations, this means that 3 months have to go by before the property owner ever sees any of the rent.
So let's do the math for a 1-year breakdown on an imaginary property that rents for $1000/m and would bring in $400/month in cash flow before property management.
Costs:
$1000 (no rent while vacant)
$1000 (cost to lease)
$1200 (10% management fee for 12 months)
$3200
+ $4,800 (Annual Cash Flow Before PM )
- $ 1000 (Lost Rent during Vacantcy)
- $2200 (Paid to Property Manager)
$1,200 (Actual Annual Cash Flow for Landlord)
... and this is true if the Property Manager
never does anything except collect the rent!
Is this really the reality...
that way a Property Management Company makes more than the property owner?
