Add 10% To Offset Your FUTURE Management Fees

Whether you’re looking to add 3, 8 or the coveted 17 rental properties to your investment portfolio you should seriously consider adding in a 10% management fee to your numbers before you buy.

Consider this scenario:  You’ve purchased a property that you anticipate will rent for $1650 and you cash flow $150/ month. This is great so long as YOU’RE managing it.

Now, suppose that a very interesting business opportunity comes up that takes up all of your ‘spare time’ you used to dedicate to your property… Simple, you just hire a manager, right? Not really! A manager will use up more than your monthly free cash. And thus, you’re stuck and you may have to pass on a great opportunity because you can’t afford a manager.

OR What if you decide to take your family on a world tour for 6 months? Using the numbers above you’re still stuck. (You could just manage it yourself, I supposed… What could possibly go wrong with your toilet while you’re in Tibet??)

But what if you spend the extra time and energy and work with a great realtor and mortgage broker to find a property that will cash flow even after a 10% management fee? What if you spend that little bit of extra time to cash flow, even, $180 / month, so you can afford to hire a manager ($165 in our example) and still have some money left over?

Obviously there is more to investing than just cash flow (appreciation, mortgage pay down, forced appreciation and annuity come to mind!) but monthly cash flow is still pretty important.  

This may mean you have to be more selective in what you buy, but really doesn’t that just mean you end up with a better deal in the end?  

It’s key to build in a 10% management fees to your projected expenses when you’re looking at investing. Whether you’re a DIY manager (and thus pay it to yourself) or not - you’ll know you have the option to outsource the management of your properties should another adventure put demands on your time that take you away from your rentals.

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