Real estate is a hot commodity, and it’s no surprise that many people with an entrepreneurial mindset want to invest in rental property. Becoming a landlord can do wonderful things for your bank account, whether it provides the main source of income or simply supplements your salary. But getting a rental unit on the market is no easy task. Before investing in property (no matter how nice it already may be), take a look at the common expenses landlords face across the country.
Buying the Property
Naturally, the very first step is buying the property you plan to rent out. This can be a costly process, whether you’re buying a single-family home, duplex, or apartment building. Unless you have enough spare cash lying around to cover the entire payment, you’re going to need to acquire a mortgage. Interest rates, loan application fees, and closing costs can all rack up your monthly mortgage payments. Not to mention, your real estate agent needs to be compensated for helping you find the property. Make sure you have it in your budget to get over this initial hurdle.
Getting Insurance
Insurance is a necessity for any landlord because it protects your property from accidents and emergencies, such as fires or floods. On average, rental homes cost more to insure than standard homes. Rates are dependent on your insurance provider, type of property, and state that you live in, but insurance can nonetheless be a big budget-eater that landlords don’t often think about, take a look at Constructaquote.com Landlord Insurance for more information.
Screening Tenants
Hiring Maintenance Contractors
When the air conditioning breaks or a pipe bursts, it’s unlikely you’ll be able to fix it on your own. Before you get tenants into your property, establish relationships with maintenance contractors that you trust. You should keep plumbers, HVAC technicians, electricians, and general handymen on-call should an emergency repair need to be addressed. If you property has any sort of exterior landscaping, gardeners and exterior renovators might need to be brought in to brighten up the curb appeal for potential tenants. All of these repairs will cost money, and it’s important to leave wiggle room in your budget because you don’t know when you’ll need to pay for the services of a maintenance contractor.
Property Management Fees
Being a landlord can often be more of a full-time job than most people think. If the day-to-day duties of handling tenants gets to be too much, you can always hire a property management company to take over. These businesses handle all maintenance requests, rent collection, and interactions with tenants that don’t require direct contact with the landlord. But don’t expect these services to be cheap—passing the baton of daily responsibility means you’ll be forking out quite a bit more than you’re used to.
Tenant Turnover Costs
More money is spent on your end when a tenant decides to leave. Between cleaning costs, regulatory inspections, and monthly mortgage payments, you’ll notice your budget grow a bit thin. Plus, you’ll need to market the open units to attract new tenants. This could include hiring a professional photographer, finding a management company to manage and respond to your online listing, paying to place ads in newspapers, and remodeling the unit itself. It’s always smarter to try and find tenants that will stay on for more than a year. But, if times are tough, consider renting to a month-to-month renter; their monthly rent can add comfortable padding to your budget.
As a landlord, there are a million and one things on your to-do list every day. Don’t add “pay off debt” to that list! When you close on your new rental property with a proper budget in mind, nothing can stop you from turning your real estate dreams into reality.
