While increased ROI on rental properties is far from the only reason to hire a professional property manager, many property investors want to see clear economic benefits before taking the plunge and outsourcing this key responsibility. Based on All Property Management’s recent survey of 300 property managers from around the US, it’s clear that professional property managers pay for themselves based on vacancy reduction alone.
According to the US Census Bureau, the national average rental vacancy rate hovers around 9%, while our survey reveals that the average vacancy rate for professionally managed properties is about half that, coming in at 4.5%.*
To calculate what this reduction means for the average rental property owner’s bottom line, we took a look at what it would mean for the owner of a property valued at $150,000, with a monthly rent of $1,250, assuming a 10% monthly property management fee. We found that, when you take into account both lost rent and turnover costs, each 1% drop in vacancy rate saves the property owner about $1,900 over the course of a five-year period. Thus, a reduction of 4.5% equals a savings of about $9,500 over five years. Meanwhile, at 10% per month, professional property management would cost only $7,500 over the same period, resulting in a $2,000 profit, which represents a 30% ROI.
All Property Management’s survey also confirms that average turnover costs total about $2,000—double that when there is an eviction, or similarly challenging tenant situation, involved. Pair this with other advantages of hiring professional property management, which include time savings, the ability to command higher rents, and improved maintenance at lower costs—just to name a few—we think payoff from using a professional property manager is clear. It’s the best investment for making a solid real estate investment.
Weldon McMath – McMath Realty Property Management
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*According to our survey, the median vacancy rate reported by our nationwide network of property managers was 4.5%. Reasons cited for this performance was a)local market knowledge b)screening for high-quality tenants c)superior customer care during tenancy d)swift action against delinquent tenants and e)longer lease periods.