I've seen people buy a rental property, not in their neighborhood but in other states with a lower cost of living. These houses usually are like $70k and they would rent it out via rental management so they get docked a fee out of their rent for the manager to take care of their property. How profitable is a venture like this even with the property manager fee I would imagine you can still make a decent chunk of change?
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2TANSTAAFL......– user253751Sep 23, 2021 at 10:36
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1This entirely depends on the numbers at play. How much does the property cost, how much will you spend annually on upkeep, how much can you rent it for [excluding the management fee], and how many months per year will it go vacant? There is little difference to this question from any other 'should I buy a rental property?' question; the existence of the manager is just one more cost to list.– Grade 'Eh' BaconSep 23, 2021 at 13:30
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1Does this answer your question? How do I evaluate a potential investment in rental property?– Grade 'Eh' BaconSep 23, 2021 at 13:32
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2Never underestimate the ability of one bad tenant to wipe out years of profit.– Simon BSep 23, 2021 at 18:37
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@Grade'Eh'Bacon I wouldn't say this is a duplicate of the other, as this question is focusing on the use of a property manager, whereas the other makes no mention of that.– Chris W. ReaSep 23, 2021 at 19:31
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2 Answers
Having a management company take a cut out of every payment will make it harder to generate a profit each month based on the income from rent and the committed expenses for the mortgage, real estate taxes and other known items.
Having a management company does transfer the time requirement of responding to the care and maintenance of the property to the management company. The owner doesn't have to respond to a phone call in the middle of the night. If that property is hours away by car a management company will almost be required.
The cost of the management fee doesn't impact the gain in value of the property over the years. That means if the expected profits are to be mostly from growth in value then the need to make a profit each month isn't the driving factor, you are just waiting until the right time to sell.
You will have to do the research to determine if the expected rent on a 70K house in that region can support the required expenses and the cost of a property management contract.
I know that when I has a condo I couldn't sell, and had to rent it out, the monthly income would not have supported a property management contract. It was local so it wasn't required. But having one would have increased the losses each month.
answered Sep 23, 2021 at 10:19
To directly answer your question. A property manager will generally take about 8-10% of your monthly rent and 1-2 months rent for every time they find you a new tenant. That is the impact of not managing your own properties (whether in or out of state). If the other state has a state income tax you may also incur costs there (but not always).
As the other answer noted, "How Profitable" involves a thousand variables, but I'm guessing you are assuming landlords make much more money than they actually do on average. It's a good venture, but unless you have a ton of properties you aren't necessarily rolling in money.
