It's been brought to my attention that I should be paying myself for self managing my Duplex and that even though my cash flow is higher in the end when not using a PM, it's my time that is more valuable and therefore the result of lower cash flow is more worthwhile.
I own a duplex in south Minneapolis in a desirable neighborhood, with schools, the Mississippi river walk, Minnehaha falls, the light rail, bus line and tons of restuarants. Not to mention low crime rates. My duplex has an upstairs and downstairs unit. Both are rented for $1195 and $750 since August. Fixed monthly expenses are as follows:
1. Mortgage = $998.84/taxes/interest
2. city of Minneapolis (garbage, recycling, water and sewer) = $131.56
3. Insurance = $138.33
What I wanted to find out is whether or not using a PM or selfmanaging and doing everything myself would be more profitable when using an hourly Handyman and property manager pay of $50.00 to do a direct comparison for a 6 month time period. Since I have a handyman business and I charge $50.00 an hour, I know that this is a reasonable wage for a handyman in the Minneapolis area. I'm going to use the last 6 months to compare the showings of both units, renting those units and all of the maintenance costs associated. I called a popular Property Management company in the Twin Cities (Renter's Warehouse) to use as a comparison to me self managing and doing all of the work.
Self management
I documented the the last 6 months with all expenses and income for rental income, city of Minneapolis Costs and Insurances, Mortgage payment, mainetance costs.
August:
Rental income = $1945
City of Minneapolis = $136.91
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs/showings = 6 (hours) * $50.00/hr = $300
Cash Flow: $370.92
September:
Rental income = $1945
City of Minneapolis = $110.43
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs/showings = $0.00
Cash Flow: $697.40
October:
Rental income = $1945
City of Minneapolis = $110.43
Insurance = $110.43
Mortgage payment/tax/interest = $998.84
Maintenance costs = 3 (hours) * $50.00/hr = $150.00
Cash Flow: $575.30
November:
Rental income = $1945
City of Minneapolis = $173.98
Insurance = $137.66
Mortgage payment/tax/interest = $998.84
Maintenance costs = $0.00
Cash Flow: $634.52
December:
Rental income = $1945
City of Minneapolis = $153.76
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs = $0.00
Cash Flow: $554.07
January:
Rental income = $1945
City of Minneapolis = $103.85
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs = 5(hours) * $50.00/hr = $250.00
Cash Flow: $453.98
Total Cash flow after 6 months =$3286.19
Total Cash flow after 12 months projected = $6572.38
((***I'm projecting the same amount of maintenance cost for both scenarios)))
Renter's Warehouse
1. At the beginning they want first months rent for each unit = $1195 & $750
2. startup management fee per unit $99.00 X 2 = $198.00
3. Monthly management fee = $70.00 X 6 months = $420.00
Total costs for a 12 month period (1 year lease)to have them find tenants, show the apartment and manage both units = $2563 / 12 (months) = $213.58 a month average.
August:
Rental income = $1945
City of Minneapolis = $136.91
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs = 2(hours) * $50.00/hr = $100.00 (showing costs are covered by Renter's Warehouse)
Renters Warehouse monthly costs average = $213.58
Cash Flow = $357.34
September:
Rental income = $1945
City of Minneapolis = $110.43
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs/showings = $0.00
Renters Warehouse monthly costs average = $213.58
Cash Flow: $483.82
October:
Rental income = $1945
City of Minneapolis = $110.43
Insurance = $110.43
Mortgage payment/tax/interest = $998.84
Maintenance costs = 3 (hours) * $50.00/hr = $150.00
Renters Warehouse monthly costs average = $213.58
Cash Flow: $361.72
November:
Rental income = $1945
City of Minneapolis = $173.98
Insurance = $137.66
Mortgage payment/tax/interest = $998.84
Maintenance costs = $0.00
Renters Warehouse monthly costs average = $213.58
Cash Flow: $420.94
December:
Rental income = $1945
City of Minneapolis = $153.76
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs = $0.00
Renters Warehouse monthly costs average = $213.58
Cash Flow: $340.49
January:
Rental income = $1945
City of Minneapolis = $103.85
Insurance = $138.33
Mortgage payment/tax/interest = $998.84
Maintenance costs = 5(hours) * $50.00/hr = $250.00
Renters Warehouse monthly costs average = $213.58
Cash Flow: $240.40
Total Cash flow for 6 months = $2204.71
Total Cash flow for 12 months = $4409.42
((***I'm projecting the same amount of maintenance cost for both scenarios)))
So what my real experience has proven to me that it is worth my time to do my own PM at this moment. I mean I only have one duplex at this point, but plan on having at least 8 to 10 eventually. The total savings by doing my own work is $2162.96. That is for 16 hours of work for a 1 year lease away from my family. That means that the per hour savings is $135.19. Plus the advantage to not using a PM and living close to my rentals is that I can catch problems that I have caught while being at the premises at the premises whenever I want. I once caught my upstairs tenants turning off the heat in December, which could have caused the pipes to freeze. A PM wouldn't catch that most likely. Or I've caught the downstairs tenants with one too many dogs. I've also caught a tenant forgetting to put the Gas bill in his name. I've also gotten to no my neighbors who have my back and have written witness letters regarding bad tenant behavior should I need it for court someday. I have relationships with other neighbors who can tell me if anything wild is happening at my unit. A PM would never have that capability. I also hear of other investment going ons in the neighborhood since I live close to the property. So at this point, I see no reason for a PM unless I want to take home less cash flow.
