By Brent Roberts
As you invest in real estate, one of the questions you’ll need to answer for yourself is, “Should I hire a property manager or should I do it myself?”
To help you answer that question, you need to first accurately predict what kind of ongoing work will be needed on your property. You can budget a predictable rate of 8% to 12% of gross rents for a property management fee that will cover their basic services, but what happens if something in the unit breaks and it needs to be replaced? Accurately predicting what could require repair or replacement will help you ensure that those situations can be addressed when they arise, regardless of whether you are managing the property yourself or outsourcing to a property manager.
Here are six areas to consider when anticipating your property management needs:
1. House Age
All houses will require some regular up-keep as well as regular upgrades. It should come as no surprise to you that the age of the house will be a factor in the amount of work you’ll need to maintain it. All equipment and construction has a finite lifespan so investing in an older home may mean committing to replacing things that have reached the end of their useful life sooner than expected. However, that doesn’t mean that newer houses are maintenance free. Newer houses may also generate a higher than expected level of maintenance as the house becomes lived in (i.e. windows stick, doors don’t close properly, untested equipment starts malfunctioning).
2. Lot Condition
The condition of the lot will also impact the type of maintenance calls you’ll get. For example, trees on the property can look beautiful but their leaves may clog up your gutters while their roots may enter the property’s sewer lines. Or a rotting fence may fall over and require clean-up and replacement.
Consider how the property handles water – both rainfall and snowmelt. Review the grade of the lot to ensure that snowmelt or rainfall runs away from the house in order to avoid getting the dreaded water-in-the-basement calls. You’ll want to make sure that sump pumps and backflow valves are installed, but that may mean regular checks to the property to ensure that they are functioning.
The neighbourhood will also play a part in the type of calls you may get from your tenants. Some neighbourhoods might not add to the overall number of calls you get while other neighbourhoods may increase the calls you get because of graffiti or vandalism. Get to know the neighbourhood so you can predict the frequency of these kinds of calls.
5. Local climate
Every season brings its own challenges for real estate investors, so it’s important to consider them all equally. Spring and summer may bring increased rainfall but fall and winter may bring increased snowfall. The local amounts of precipitation, temperature fluctuations, and wind will all influence the kind of calls you get. If you invest in a cold area, for example, where the furnace runs more often, the likelihood of furnace calls will increase. If you invest in an area that gets lots of snow, you will need to consider whose responsibility it is to shovel the snow along with regularly checking that snow build-up on the roof doesn’t become dangerous.
6. Tenant demographic
Your tenant demographic will also influence the kind of calls you get. An elderly tenant with “handyman” experience may think nothing of quickly diagnosing a non-flushing toilet and reaching into the tank to reattach the chain that fell off the lever. In other words, they’ll never need to call you because it’s not a “problem” to them. A college student tenant, though, might not know what the problem is so they’ll be more likely to call you. Conversely, that elderly tenant might need the snowy walk shoveled sooner after a snowfall than the college student who thinks nothing of trudging through the snow.
I’m not suggesting that every one of these areas will be a problem for you. But if you want to accurately anticipate what kind of calls you get (so you can budget appropriately), then you should run through this checklist.
I also recommend soliciting help from experienced professionals who deal with this information all the time. A little homework can go a long way to a stress-free investment with predictable property management. Connect with people who are familiar with the area and ask plenty of questions. Talk to your local real estate agent if you’re working with one to buy the property, talk to the neighbours, get a home inspection, contact service providers for just-in-case estimates, and walk through the neighbourhood to see what kind of work other homeowners have done.
Brent Roberts started to invest in real estate and bought his first “door” at the age of 18. Brent owned 18 houses prior to becoming a realtor. He decided to take the real estate course in the late 1980’s to become a more educated buyer. He was then convinced to become an agent and has never looked back. Contact Brent at firstname.lastname@example.org.