According to RealWealthNetwork.com, “Jacksonville offers great opportunities for investors today, especially those looking for an affordable investment, a strong cash flow opportunity, and long-term economic stability.”
If you are staying in Jacksonville and have some free time you might consider being a Landlord yourself.
On the other hand, if you are deploying or relocating away from JAX it might make more sense to hire a property manager to handle your rental for you.
Rental Property Values in Jacksonville
The median home price in Jacksonville is $141,000, with the median rent ringing in at $1,150. Using that price, you would expect to pay between $80-$150 each month in property management fees based on average fees of 7-10%.
And the Jacksonville rental market continues to grow.
According to a more recent article from Bizjournals.com, Jacksonville recently had a 5.1% increase in rental costs from 2017-2018.
Estimating Profit: DIY Landlord or Hire A Property Manager?
Profit for DIY landlord could be more in the long run, but DIY will require more time investment each month. And that can really add up.
Cost of repairs on your rental home will be similar whether you do are acting as landlord yourself or hire a property management company... but there are other costs associated with doing the repairs yourself.
In Jacksonville, using the example above of a moderately priced home, you should expect to pay between $80 and $150 dollars a month in property management fees.
That small fee can be worth it to avoid the 2 AM emergency toilet overflow problem, or to avoid having bad tenants that don’t pay rent.
Losing time...and sleep
The Emergency Flooding Scenario - Landlord
Let’s assume that your place is already rented. You have done the hard work of getting a lease signed and hopefully good tenants in your home.
You get a call at 2 am on a Sunday morning.
There is water all over the bathroom floor.
Frantically, you search for emergency plumbers on the internet.
It is the weekend and in the middle of the night. You're searching for service plumbers that offer emergency services.
You dial around.
You lost 2 hours of sleep while you called around for someone to take care of an emergency plumbing repair.
So, now it's 4 am and you are wide awake.
You make some coffee and wait for the repair estimate.
You wait another hour for the plumber to arrive at the location, assess the damage, and call you back with quote. 5 am now.
Sleep deprived and anxious, you groan because you know you are paying for plumbing service at a premium price.
And now, it's 6 am.
Wide awake from anxiety and caffeine, there's no going back to sleep anytime soon for you.
The Emergency Flooding Scenario - Property Manager
In this scenario, you have a property manager that your tenants call in emergencies like this.
The property management company has someone on contract who takes care of issues like this day or night. The call is routed to them and they take care of the problem.
You lose no sleep and have zero stress.
You wake up on Sunday morning feeling rested.
You have waffles with fresh syrup, eggs, and fresh fruit with your coffee.
You receive a report from the property manager that the issue has already been resolved as it was within the threshold of repairs they were authorized to take care of.
You go on with your day, after all....it is Sunday Funday!
Reconciling Lost Time
If we just call it 2 hours of lost sleep it is hard to quantify.
Let’s put a number on that and see where we land after a month.
If you don’t already have renters you have a lot of work to do.
Someone has to pay that $800 mortgage. Will it be you? Will you lose sleep over that too?
The following is a list of just a few things that you will have to take care of that will take time out of your schedule.
Marketing - You must list your place for rent and respond to inquiries | 2 hours |
Phone Calls - Answering questions and setting up viewings | 2 hours |
Showings - You might only meet a few people before you have an interested party | 2 hours |
Background/Reference Checks - More phone calls | 2 hours |
Cleaning - The house needs to be ready for renters | 2 hours |
Yard - Hire or do the work, the yard needs to be move-in ready too | 2 hours |
Lease - Research and probably an hour or two of review with a lawyer | 2 hours |
Bank - Set up an escrow account for the deposit money | 2 hours |
Accountant - Meet and review what documents you will need at tax time | 2 hours |
All of those hours of time add up.
If we only assign an average of two hours per item above (which would be VERY conservative for cleaning, yard work, and showings) we could estimate 18 hours of your time.
Just the preparation required to find a tenant and prepare the property is already a part-time job.
And let's be real. You will not have to get new renters each month, so 18+ hours of time working on your home will not always be the case.
But think about how much harder it would be to accomplish and check off the things on that list ^^^^ if you are across the country or on the other side of the world?
How much is your time worth?
You live this life one time and one time only.
How much is each hour worth to you? How much are you worth to others?
$29/hour? $59/hour? $99/hour? More?
If you’re an employee at a company that allows time off for personal emergencies, 20 hours at a pay rate of just $20 per hour is still $400 of lost time (and possibly wages if you had to take off from your regular job to deal with an emergency).
If you own your own business, 20 missed hours could cost you thousands of dollars in missed opportunities or employee errors.
Even a rental property non-emergency will cost you time and possibly money.
Are You Local? Are You Handy? Do You Have Time To Help In Case of Emergency?
If you answered “Yes” to all three questions above and are organized with paperwork and processes, being a landlord may be for you!
Here’s the sweet spot - being available, organized, and a handy-man just made you about $1200 this year.
That’s it. Better go celebrate quick!
You see, for a property manager service on a basic property, you would spend around $100 a month.
For $100/month, you don’t have to screen tenants, take emergency calls, keep up with all the receipts and paperwork for the CPA at year-end, NADA.
You would have a team (hopefully a good one - more about that here), that specializes in:
- finding renters (doing all of the marketing for you)
- vetting them and checking references
- dealing with the legal aspects
- repairs/maintenance
- and managing all the ins and outs of managing a property.
All you have to do is check your bank balance every month to be sure the rent was deposited and accept your profit of $920/year, all while growing the equity in your home as someone else pays your mortgage.
$920/year to do nothing.
Let’s revisit the math from the example above.
Base Rent from example above: $1150 x 12 = $13,800
Less Mortgage Payment: -$800 x 12 = -$9600
Less PM Fee: -115 x 12 = -$1380
Less Anticipated Annual Maintenance: -$1725
Lease Renewal Fee (if applicable, some PMs charge this fee): -$175
Estimated Profit: $76/month or $920/year*
Someone else is paying your mortgage.
Someone else is taking care of the property for you.
Your home is increasing in value as your equity grows.
Your debt/credit ratio lowers a little more each month, as someone else pays off your loan.
Oh, and you still get a little spending money.
Not bad.
VALUE OF TIME
If you decide to do it yourself, you would be “making” an extra $115/month. .
To get this full amount, you may have to:
Be available at all hours for an emergency.
Call and track down a late rent check (unless your tenant screening process was top-notch)
Go by the bank to deposit that check (unless they pay automatically or by bank draft/deposit)
If that doesn’t work, you may have spend time at the county office to process an eviction.
Be available to clean out a property and have time to market the property online and screen next tenants - to keep the property filled, and reduce your vacancy rate.
Photo by Szűcs László on Unsplash
MAINTENANCE SAVINGS WITH A PM
The power of buying in bulk is real. That is why stores like Costco and Sam's Club are so successful.
As a DIY Landlord, you could be proactive and have an electrician, plumber, HVAC, landscaping and such providers on a list to call if you have an issue.
Maybe you are really a go-getter and have a couple of each on a list!
You will pay full price for services (unless that contractor is your cousin), and if it is after business hours or an emergency, expect to pay a premium.
Another advantage to using a property management service - you will be able to leverage their bulk purchasing power.
A good size management firm will not only have a maintenance person on call, but may have one on staff. This will save hundreds if not thousands on a major emergency repair.
MARKETING & LEGAL ADVANTAGES OF A PM
Property managers also have bulk purchase power in their marketing departments. Your place will be rented faster after having the market exposure provided by a professionally managed firm.
They will help you price your property to maximize your profit and get it rented sooner, rather than later, so it is not sitting on the market empty.
Their experience on what works, how to structure an ad, and where to put the ad, will save you time and money when it is time to find a renter.
Local property managers know the ins and outs of the lease contract so you will be legally covered.
In the unlikely event that a renter needs to be removed, they know how to handle that too.
TIME IS A COMMODITY
These things will not only save you cash but your time as well.
Every hour you spend dealing with your renters or finding new renters will cost you time.
If you put a value on the hours of free time you have, or consider how a repair could cut into your working hours, the cost of not having a team could quickly outpace the $115 you could pay a property manager each month.
In the end, you are the only one who can make a decision about what is right for you and your home.
If you are moving close by then you could try to do all of these things on your own.
There is no reason that you couldn’t bring in a property manager later if you find it is too much work.
READY TO SEE HOW MUCH YOU COULD BE MAKING?
Get you free rental property analysis here.
Navy to Navy Homes
4540 Southside Blvd, Suite 702
Jacksonville, FL 32216
904-900-4766
