If you are getting ready to invest in your first Sacramento rental property, you’re probably considering the pros and cons of hiring a professional property manager versus managing the property on your own. Kudos on doing your homework and taking the time to weigh the benefits against the cost. In order to make things a bit easier on you, consider these points that highlight how much work you can really expect to contribute to the average Sacramento rental property.
The Key Skills Needed To Manage A Property
There is a reason why property management is an actual profession; it requires a significant amount of skill. Here are some of the primary skills that you will need to have under your belt in order to be successful in managing your own Sacramento properties.
Not only do you need to be able to work out the numbers of how profitable a property will be before putting in an offer, but you need to know how to handle the accounting for your property like a real business. This means handling your accounts payable and receivable, financial planning for the future, and building a savings for the unexpected. In other words, if you struggle to manage your own accounting from an optimal standpoint then you’re definitely going to need help in managing the accounting for your property aka investment business.
Marketing your properties requires a great deal of knowledge on the local area, digital marketing itself, the psychology of your customer base, staging, copywriting, graphic design, and pricing. If you want to get the maximum value out of your Sacramento rental properties you need to know how to market them in a way that attracts high demand from the best quality tenants in order to support the highest possible rent.
One of the biggest components that throws a lot of new landlords for a loop is the legal one. There are many local building codes and laws that you constantly need to abide by and pay attention to as they change. Furthermore, as a landlord you are exposed to a unique set of legal liabilities which you need to be aware of and need to be prepared to defend yourself against. You can certainly take the time to study all of these and follow the proper channels in order to stay up-to-date on the codes and laws as they change. However, if you’re anything like most people, that is a task that is too daunting to tackle on your own which means a property manager can really save the day and prevent you from losing your whole portfolio over something you missed in the legal department.
Last but not least, you’re going to either need strong construction and maintenance skills or a strong connection to someone who does. Obviously you know that your new investment property is going to need ongoing maintenance which means that if you cannot or do not want to handle all of those time-consuming tasks you need to find someone you trust that will. If you haven’t already, you’re going to need to assemble a list of trusted professionals that can tackle everything from plumbing and electrical to landscaping and appliance repair so that when tenants call with issues you can address them in a timely manner without wasting your rental revenue on mistakes.
The Real Numbers
On a basic level, you may think that calculating the potential profit or loss of a property is simply measuring what you believe you can collect in rent versus what your monthly mortgage will be. However, there is a lot more to it than that. First of all, you need to be basing those rent projections on a number of factors like average rent in the area or building, school districts, median income, the job market, property taxes, the cost of getting the rental unit up to code, etc.. Not to mention, you need to make sure you will have enough money left over each month or year to put into savings, as well as, insurance to protect you from less than savory tenants. Legal, marketing, and accounting fees are another to consider in case you wind up needing help from a professional other than a property manager. You can either make or cost yourself a fortune by how well you calculate the real numbers of owning your property so make sure you are thorough.
From a basic standpoint, you should be using this formula to calculate your potential return on investment for any rental property you are considering purchasing:
Revenue or Gain On Investment – Cost of Investment
Cost of Investment
In other words, your ROI is calculated by subtracting your cost of investment from your revenue and then dividing it by that cost again.
Would You Prefer To Spend Your Time Managing Your Sacramento Property?
Ultimately, your real estate investment portfolio is a business and it is your business! That means it is your decision whether or not you should hire a professional Sacramento property manager to help you optimize your portfolio. However, it is also important to be honest with yourself about whether or not you are the best person for the job or whether the small monthly cost of having an experienced professional is worth it.