I currently owner occupy a 4 unit multifamily property in Dayton, OH (West Carrolton to be exact). I have too much going on in my life to keep managing it myself so I'm considering hiring a property management company. I'm having a hard time getting the numbers to work and I'm afraid I made a bad deal. I may just also be stressed about what I can and can't get for the rents. Currently I have a 1 bedroom rented for 600, an empty 2 bedroom, and another 2 bedroom rented for 580. I think I can get more for the 2 bedrooms, but I'm afraid that maybe I can't. I'm also afraid that maybe I just got lucky renting the 1 bedroom for 600. I'll list my income/expense numbers below. If anyone has any suggestions please let me know.
1 bedroom - 550
1 bedroom - 550
2 bedroom - 600
2 bedroom - 600
(I put my rental numbers at the minimum I think I can get. I might be able to go up but I'm having a hard time understanding my market/area.)
Total income: 2300
Mortgage/Insurance/Taxes - 1352
Maintenance/CapEx (10%) - 230
Water/Sewage/Trash - 220
Electric - 15
Vacancy (8%) - 184
Lawn Care (40/week averaged over the whole year) - 113
Property Management (10%) - 230
Total Expenses: 2341
This also doesn't include the one month's placement fee with the property management company.
I'm just not sure where to go here. If I can get another 50/unit I might be breaking even, just not sure. Any advice is appreciated.
If you're getting $600 for a 1 bedroom, then obviously you could get more for the 2 bedroom. You need to do some market research. Maybe your 1 bedroom is under market for all we know. Get on websites such as Zillow and Craigslist and see what 1 bedroom and 2 bedroom apartments are renting for. This will give you an idea. They of course need to be nearby and have similar amenities.
Your income is too high since you're living in one of the units (or are you planning for when you move out?).
Why is electric an expense? Is the building not metered separately for electric (and water)?
Until you have a strong finding on what nearby apartments (better to be apts like yours rather than apartment complexes), it's hard to really say what you could do for rent.
@Nicole A. , common area electric is likely billed separately, as it should be.
@Nicole A. The electric is a security light for the off-street parking lot. And you are correct that I was budgeting for when I move out of the unit I'm currently living in. The properties near me have very low rents, but I don't think they've been raised in years. When I bought the place the 2 bedroom was rented for 560 and the 1 bedroom was rented for 510. It's also not metered separately for water. I never go over our city's minimum requirement though so would it be weird to split that out between the tenants or instead just charge more for rent?
You don't go off of currently rented units for the reason you stated (they may be several years old and not increased). You look for rental ads that are on the market right now.
Okay, just double checking on your utility situation because if it's metered separately, you can just have the tenants pay. And your vacancy savings would cover when you pay utilities on an empty unit.
I'd suggest that maybe you could refi to get that mortgage a little lower, but I don't know your current rate but it's most likely lower than any rate you could get today.
Assuming updated finishes appropriate for the neighborhood, your rents on the 2BR are probably a tad low. I would expect more than a $50 premium to go from 1 to 2 bedrooms.
As far as water goes, I'll assume it's one common meter since you're paying. Is it common in the neighborhood for your type of building to include water in the rent, or no? If yes, you'll be hard-pressed to bill the tenants for water and still get market rent. If you can get away with billing for water, you can install a RUBS system, but the cost upfront can be pretty high, depending on how much work it entails.
One of the things you could do is check for leaks in all the units. Put red dye in the the toilets tanks and see if it seeps into the bowl. Wait 5 minutes. Check the tubs and sinks. I believe the water bill should be lower that that with one vacant unit. Depending on how big the yard is maybe you are paying too much to mow? Look for better ins rates. A proper management company should only charge for the units that are occupied.