ROI on property management: Is hiring a property manager worth it?

If you’re a new rental property investor, you may be on the fence about whether or not hiring a property manager is worth it. On one hand, hiring a property manager can save you a lot of time dealing with leasing, rent collection, tenant screening, and maintenance work. On the other hand, you get to keep the extra buck if you do it yourself. 

One way to know for sure is to calculate the ROI of hiring a property manager. Poplar Homes offers an  ROI calculator to determine the value of its tech-enabled services. In this article, we’ll talk about the importance of knowing your ROI on property management, how Poplar’s ROI calculator can help, and how it works. We’ll also look at scenarios to demonstrate how you can use this handy tool. 

The importance of getting the ROI on property management

Hiring a property management company is a huge commitment for rental property investors, especially those who are still starting out. With fees ranging from 6-12% of monthly rent, many homeowners may feel the cost is too high and are left unsure whether or not hiring a property management service is the right option. 

This is a valid concern as hiring a property management service may not always give you a better return on your investment depending on several factors including:

• type of property you have 
• size of your property
• number of doors you manage 
• quality of your tenants 
• your skill in managing rental properties
• monthly rent(s)
• time you spend managing your property(ies)

Getting the ROI before hiring a property management company will help you eliminate the guesswork and know how much value you’re going to get from your property manager. 

What the Poplar Homes’ ROI calculator does

The ROI calculator shows you how much time and money you can save by using Poplar Homes’ services on a single property. That way, you have a concrete basis for deciding whether or not hiring a property manager is more economical than managing your property yourself. 

The detailed report also contains a breakdown of the savings you get when you hire a property manager. 

• Value of your time per hour – How much your time is worth
• Value of your time savings – Monetary equivalent of the time you saved by hiring a property manager
• Maintenance cost savings – Expected savings when you leverage our vetted contractors’ competitive rates
• Vacancy cost savings – Amount you save by having a property manager lease your property faster

How Poplar’s ROI calculator works

When you use our ROI calculator, you will be asked to provide the following details:

• Your annual income from all sources – We use this to compute the value of your time per hour based on a 40-hour workweek. The higher your annual income, the higher the value of your time per hour. 
• Hours spent managing your property per month – We use it to calculate the value of your time savings. Generally, the more hours you spend on your property by self-managing, the more value you get from hiring a property manager. 
• Property area – Your property’s square footage will be used to estimate maintenance costs using the square footage rule. Then, we use the estimated maintenance cost to calculate the estimated maintenance cost savings when you leverage our vetted contractors’ competitive rates and 0% markup fees. 
• Rent price – Your rent price will determine how much you save from vacancy costs. On average, Property management companies fill vacancies within 30 days thanks to aggressive leasing and marketing efforts. For DIY homeowners, however, it’s not uncommon to take twice as long to fill vacancies. 

Using the details above, our system will calculate an estimated ROI using Poplar Homes’ tech-enabled services.

How to use the ROI calculator

Using the ROI calculator is pretty straightforward. Just head over to our ROI calculator page, enter the requested details, and download the full report. 

But to better understand how you can use the calculator to help you decide whether to hire a property manager or not, let’s take look at the following scenarios: 

Scenario 1:

You earn $97,000 annually from all your sources of income. Apart from your full-time job, you own a 2,000 sq. ft. single-family home which you rent for $2,000 a month. You have a model renter living on your property who has expressed her desire to stay longer. Because your property is new and doesn’t need frequent repair and maintenance and your renter doesn’t cause any problems, you only spend a total of 4 hours a month managing your property. 

Entering the details into the ROI calculator will give you the following results:

This shows that the expected ROI you get from leveraging our property management services is $3,518. But what if all these savings don’t apply to your situation? You can use the breakdown to customize the results. 

In this scenario, you already have a model tenant that has expressed her desire to live in your property longer. Therefore, you may not need the $3,000 vacancy cost savings. That means you can subtract your vacancy cost savings from the total ROI leaving you with $518. From there, you can decide whether or not hiring a property manager is worth it.  

But what if you have the same property but under different circumstances? Let’s look at the next scenario. 

Scenario 2:

You still earn $97,000 annually from all your sources of income and you maintain your2,000 sq. ft property which you rent for $2,000 a month. But this time, your renter shows no interest in renewing the contract because she’s planning to move to another state in 3 months. So, you spend 10 hours a month marketing your property, replying to several applicants’ questions, and screening them while still being responsible for attending to your current renter’s maintenance requests. 

Using the details provided in this scenario, the ROI calculator will give you the following results: 

As you can see, the total estimated ROI is $6,876 which is significantly higher than the previous scenario even though the details for the property remain the same. 

In this scenario, you are spending a lot of time doing the nitty gritty work of property management since you are looking for a new renter while still responding to your current renter’s requests, hence, the value of time savings if you hire our property management services will increase significantly. 

On top of the time and cost-saving benefits, allowing Poplar to place your next renter mitigates significant risk. Poplar Homes offers Rent Guarantee and Eviction Coverage to Poplar-qualified renters. 

Rent guarantee means we will initiate rent payouts by the 3rd business day of the month regardless if your renter pays on time or not.

And if an eviction were to happen to a Poplar-qualified renter, we will work with top attorneys to handle the entire eviction process and cover up to $15,000 of the legal costs. 

In this case, hiring a property manager is the most obvious choice as the benefits far outweigh the cost. 

Using Poplar’s ROI calculator, you can generate a detailed ROI estimate in a matter of seconds. Knowing the ROI of hiring a property management company removes the guesswork and gives you a concrete basis to determine whether or not leveraging property management services is worth it.