DISCLAIMER: If you’re retired with a lot of spare time on your hands and find managing your property “fun,” manage SEVERAL rental properties as a primary business and source of family income, or are a stay at home spouse with no outside distractions who does this for part-time income – then you can probably stop reading….
If not, this paper is for YOU!
However; if you have a 1, 2 or 3 bedroom cabin you’ve decided to “self-manage” AND you have a full time job, a spouse or significant other who also works full time, school aged children, and/or elderly parents to take care of...then this is article is something you NEED to read!
Let me ask you a couple of simple questions…
What could you do with an extra 240 hours per year? What is YOUR time really worth?
Let’s make a few assumptions and look at the economics of small cabin self-management.
Assume you have a 2-bedroom cabin that generates $48,000 of gross annual income. Let’s further assume the following “management” expenses – NOT utilities, insurance HOA, etc. From that $48,000 you need to take out the cost of linens – laundering and replacement - garbage collection, basic maintenance supplies like batteries, lightbulbs, HVAC filters, kitchen and bath convenience items, etc.
After those expenses, you’ll make probably $46,000.00. But there is another cost involved: your TIME to manage. It may not seem like a lot, but let’s look at the reality of the cumulative hours.
You take time to:
- Create and update any web listings and social media sites.
- Interact with prospective guests and their questions.
- Generate, process, and send out rental agreements after bookings.
- Ensure proper financial accounting and tax reporting.
- Deal with refunds (full or partial) or cancellations.
- Assist guest check-ins and answer late-night calls regarding driving directions and lockouts.
- Assist guests dealing with maintenance and cleanliness issues in the cabin, or worse – bed bugs!
- Deal with checkouts and coordinate cleaning and maintenance.
- Find new cleaners and maintenance people.
- Work with your accountant each January to generate the requisite IRS Form 1099-Misc. for the money you paid to cleaners, maintenance, or other technicians.
On average, that’s a little over 3 hours per stay. Even if we are conservative and say only 3 hours of your time per stay, when you multiply this by an average of 80 times/bookings per year(the average for a 2-bedroom cabin) it adds up to approximately 240 hours per year you spend managing your investment property. That is 6 weeks of your life!
Now, let’s look at the same situation but with us managing your property at 20% management commission instead. Your cabin is bringing in $48,000, minus $9,600 in management commissions and an additional $936 for our Cabins for YOU Advantage Plan. This leaves you $37,464 or $8,536 LESS than you’d make if you managed it yourself, BUT you would have spent 240 hours making that, which is only $35.56 per hour. Is your time worth ONLY 35.56 per hour?
What are you missing out on for that $ 35.56 per hour?
- Additional Business Opportunities?
- Family Dinners?
- Family Holidays?
- Sporting Events and Recitals?
- Weekend Getaways?
- Good health?
Let me put it another way. If you take what you earn in gross annual W2/1099 income (exclusive of your cabin) and divide by the number of hours you work per year (probably in the 2,100-hour range), I BET you earn a lot more than $35.56 per hour. Please do that exercise and see for yourself!
The numbers are even worse if you are self-managing a studio or a 1-bedroom property. So again I ask – what is your and your family’s time worth?
Never forget the value of time. You can acquire much in life. By comparison, time is fixed AND limited. Use it wisely.