Investing in a rental property can provide cash flow and generate value from appreciation. However, with a big purchase like this comes rental property expenses that are often forgotten about. To avoid any surprises, we’ve compiled some important factors to consider and keep in mind as you move forward into your rental property investment.
Aside from the cost of the property itself, closing costs, mortgage, and insurance, one of the top rental property expenses that are often forgotten about are general maintenance costs associated with the property. As the landlord, you are responsible for
To name a few. The details of who is responsible for which repairs should be clearly stated in your lease with the tenant. All too often new investors will go into purchasing their first rental properties and not account for property management costs because they intend to manage the property themselves. This is fine, however, you may notice down the line that you just do not have time for this, and hire a property manager. Be sure these costs are accounted for.
If you are purchasing a rental property, it’s probably already at least a few years old. Even if the property has been recently renovated, it’s not uncommon for an issue to arise in a year or two. With this, be sure to set aside a budget for unplanned repair expenses.
Similar to buying a home, some of the best rental property deals require a little bit of TLC. However, the price tag could sometimes be too good to be true. Remember to include the cost of repairs and renovations, and you will need to allocate money for permits, the time needed to obtain them, and check that the location is zoned for the planned use.
When you are the owner of a rental property, you, unfortunately, will most likely be dealing with a renter here and there who isn’t paying rent. You may be subject to a month or potentially several if having to evict the tenant. Other than a difficult tenant, you may also experience a lack of rent due to being between renters or renovating a unit.
While this is not a direct expense, the loss of income is almost certain to occur at some point and could prove substantial if you are not prepared.
Rental property expenses that are often forgotten about is your property’s curb appeal. This can have a big impact on the number of potential tenants you can attract. While some rental property owners pass landscaping onto their tenants, you will most likely run into expenses in between renters and especially before photographing for a property listing.
Established landscaping can also cause property concerns like vines growing on power lines and roots growing into underground pipes.
If you are opting-in to be in charge of your rental property’s landscaping, be sure to
Both landscaping and pest control can seem like a good area to cut corners to reduce costs. In doing so, however, it can often end up costing more in the long-run. Dealing with an active pest infestation can cost you thousands, especially if unattended and spreads into other units in your building or complex. This can usually be prevented with regular maintenance and control.
Not only does a pest infestation add a significant expense to your wallet, but having an infestation can lead to negative reviews and word-of-mouth about your properties, which can then affect the number of qualified renters you can attract in the future.
Property taxes can be higher or lower, depending on the area of Arizona you live in. Relatively speaking, Arizona has the lowest property taxes when compared to many other areas of the country.
The average effective property tax rate in the state of Arizona is 0.72%, which is well below the national average of 1.08%. To calculate property tax in your area, use SmartAsset.com’s property tax calculator here.
Buying an investment property is a big step for anybody. Being aware of these rental property expenses that are often forgotten about can eliminate the possibility of surprises without financial backing behind you. If you have further questions about your current or future rental property, we love to help! Please feel free to contact us today!
© 2024 Capstone Realty Professionals - All rights reserved