Maximizing Rental Income: Choosing Between On-site and Off-site Property Management for Your Oceanfront Condo
There are two schools of thought about using on-site or off-site property management.
On-site Property Management.
From my experience in our market, whenever owners elect to use off-site property management, their tenants are not allowed to use most of the on-site amenities.
If you go the on-site property management route, your tenants are probably going to have a much better experience because they’ll be able to use all the on-site amenities, and they can simply walk down to the front desk and ask if they need anything.
Going the On-site Property Management route, you’re more likely to have satisfied and therefore repeat customers who will rent your property year in and you’re out, repeatedly. Two-things impact your rental business because of the yearly repeat tenants: you can successively build your Gross Rental Income (GRI) each year upon the next year and, due to the loyalty of your tenants, you may be insulated from the ups and downs of the rental market. In other words, if the rental market has a bad year overall, because your tenants are loyal, you may not see a significant reduction in Gross Rental Income.
All that sounds great, but the downside is that generally an on-site property manager is going to charge a higher property management fee when compared to off-site property managers. So, you won’t make as much money as you could initially, but you’re more likely to have satisfied tenants that return yearly and in the long run, build a more resilient rental business.
In actual terms, if your on-site property manager charges 40%, and your off-site property manager charges 25%, that’s a difference of 15% in your pocket annually. With a Gross Rental Income of $30,000 per year, that’s $4,500 more dollars per year in your pocket. At the end of 10 years, that’s $45,000. I don’t know about you, but an extra $45,000 sounds good to me.
Keep in mind that while you might not make as much money initially using the on-site property management due to their higher fees, as your book of business grows, you should begin to make more and more Gross Rental Income until your rentals reach maximum occupancy. You should eventually realize close to the same—if not the same or greater—profitability as if you used the off-site property management company, and once you reach this point, you’ll most likely have a more economically resilient rental business.
Off-site Property Management.
When you go the Off-site Property Management route, your tenants will most likely not be able to use most of the amenities and because of that, they may not rent your unit again. However, be reminded that Myrtle Beach is the number 2 vacation destination on the East Coast and has over 20 million visitors each year. There are plenty of new tenants each year to rent to.
The Off-site property management company will most likely put more money in your pocket now because their management fee will be lower than the on-site property manager, and with all the new tenants coming to our market each year, why be concerned about building a book of business for your rental property? You can just get new tenants. Yes, that’s right, but you’re basically left to the mercy of the ups and downs in the rental market. If the market overall has a bad year, you’re probably going to have a bad year too. But, when the years are great, you’ll put more money in your pocket.
So, how do I choose?
This largely depends on your own personal financial objectives. Do you plan to own an oceanfront condo for 10 years? Would you like to bolster your retirement years through passive rental income? Maybe you’d like to build your portfolio through oceanfront condos. Then it may be advantageous for you to use the onsite property management company.
If you’re not going to own your condo for more than a few years, you’ve purchased it for recreational use and rental income is not important to you, or you’re not planning to grow the oceanfront condo portion of your portfolio, then the off-site property management route may be a better for you.
These are simply my thoughts on the matter. I recommend consulting your financial advisor, certified public accountant, or attorney to confirm which route is best for you.
Call today to discuss your next Oceanfront Condo purchase in the Myrtle Beach Real Estate Market: 843-360-1737