April 16, 2015

How Much Work Are Rentals?

Rentals are not truly a passive investment.  Owning and running rental properties requires work on your part.   You can minimize the amount of work you do by hiring people to do everything possible.  Or you can save money and do everything yourself.    Clearly then the amount of time you put into a rental is something you can control yourself at least to some degree.

For our properties we've done a mix of everything as far as the level of work we put in.    Some of our properties are in other states and we don't manage them directly.    I bought a couple properties with my parents and my dad now runs those for us.    Another house we own was my wifes old house in another state she used to live in and we have a  property manager that runs that one for us.    The other rentals we have are local and we do all the work on those ourselves.    I've also seen my dad run properties for a few decades now.  He has multiple rentals including mostly mult-unit properties.  

My rough estimate is that on average a single rental is likely to take about 1 hour a week of your time if you run the property yourself.   

Some of that work is collecting rent regularly, some of it is handling random repair needs, you'll have to spend some time doing paperwork and taxes, and then a large chunk of the work will revolve around handling vacancies and turnover.

My 1 hour per week estimate is a gross average based on my opinion and experiences.   There are going to be huge variations in the amount of work required for rentals.    You might spend 10% of that or you might spend 5 times as much.  

Work on rentals varies considerably over time.     For long periods you may do nothing at all on a rental except collect your monthly rent check.   Consider yourself lucky if that lasts.  Eventually there will be a problem that needs repair or a late rent payment you need to chase.   Then sooner or later you'll have to handle a vacancy and all the work that goes into that.

How you do things will impact the amount of work that rentals take as well.    I'm not talking about hiring people versus doing every bit of work yourself.  Instead I'm talking about how you manage your time and what you decide to do for the rentals.   Consider something simple like collecting the rent.   A landlord could decide to visit every tenant in person on the 1st of the month to collect rent in person.   Or you could just have tenants mail you a check which you then deposit in the bank.    Or you could even have them deposit the rent payments directly into your bank.   Comparing these possible options you'd look at anywhere from a 1 hour round trip to do it in person to virtually zero time spent with an electronic payment.   There are various examples of how you might spend more or less time working on your rentals based on how you do things.  

The amount of work will also vary depending on your experience level.   Generally the first time you do something it will be new to you and likely take you longer.   Then the next time and subsequent times you do the task it will be easier and quicker. 

The nature of the rentals themselves and the kinds of tenants you have will also impact the amount of work you have to do.   Less expensive apartments are likely to have more turnover and thus be more work than a larger single family home.    Lower income tenants are also likely to have more turnover than higher income tenants.   Of course these kinds of things are broad generalizations but on average I'd expect lower rent properties to have more mobile tenants.     Older or poorly maintained buildings are going to experience more frequent failures and need repair more often.  

If you hire a property manager then the amount of work required will be significantly lower.   I'd estimate that to be more like 1 hour a month.    A lot of that is overhead involved in doing your own paper work and simply occasional discussions with the property manager to approve repairs or similar.


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