What does it cost to hire a property management team? And is it really worth the monthly fee to work with a professional company? That’s the first question I’m answering on today’s Q&A episode!
This episode of Investing in Real Estate features three listener questions on property management fees, leveraging the equity in rental properties, and weighing the pros and cons of a 1031 exchange. I appreciate your thoughtful questions; click play to hear my answers!
On this episode you’ll learn:
- How to decide if you should hire a property management team.
- Ideas for leveraging the equity in a rental property.
- How to determine if a 1031 exchange is right for you.
How to Decide If You Should Hire a Property Management Team
Is hiring a property management company worth the monthly expense? My answer is always a resounding yes. Managing a rental property is a full-time job. If your intent is to have a passive investing experience, I would not suggest picking up a full-time job as a property manager!
Remember that the cost of hiring a property management company is part of running your real estate business. Work it into your numbers, and be sure that your investment can carry this cost. A good property management company will usually cost you around 8-10% of your monthly rental income. In my opinion, it is well worth that fee.
Ideas for Leveraging the Equity in a Rental Property
Leveraging the equity in a property comes down to the loan to value ratio. Most lenders will offer a loan based on 80% of your equity. There are many different financial products out there, as well as many different lenders. My suggestion to you is to shop around.
My first choice would be a home equity line of credit, but these can be difficult to acquire on a rental property. Try local banks and credit unions first. You could also consider portfolio loans and pursue private lenders. There are a lot of options available to you, you’ll just need to look for the best product and the best rate.
How to Determine if a 1031 Exchange Is Right for You
A 1031 exchange is a great way to defer taxes. However, it’s not for the faint of heart! The IRS has strict regulations and timelines in place. Additionally, you need to make sure that this transaction makes sense for you personally. I’d start by having a meeting with your accountant. Read my guide on 1031 exchanges to learn more about the specific rules and limitations you’d need to follow if you decide to proceed.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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