While it can be a brilliant idea to become a landlord, there are expenses other than the mortgage that you will have to worry about each month. These hidden costs incurred while keeping the home in good shape are what you need to look out for.
Owning rentals can be executed without necessarily hiring a property manager, but that doesn’t mean it’s a good idea. A property manager markets the property and brings in qualified tenants, helps in the collection of rent, organizes for maintenance and repairs and also deals with issues to do with tenants like evictions and complaints. If you own several rental homes, hiring a property manager is a must. A property manager generally costs 10 percent of the rent earned from the home.
Taxes And Insurance
Taxes and landlord insurance are the most common costs and cannot be avoided. However, there are differences when you compare taxes paid for primary residence and a rental house. As far as the costs are concerned, rental homes will cost more in taxes and insurance. You need to make sure you are covered to protect yourself and the property from losses in case you are sued by tenants. Most insurance companies offer landlord insurance policies that can offer protection against the vast majority of potential incidents.
Legal And Administrative Costs
As a landlord, it is advisable to budget money for legal advice and learning your rights. Tenants have numerous legal rights when renting from you, so it’s important to know where you stand. You may need a lawyer to draft legal agreements.
If a tenant needs to be evicted, you should be prepared to pay for extra work to cover legal disputes that may arise in the process. Most rental homes must also be made available for inspection. If defects are noted, the owner could face legal action for allowing tenants to occupy a home that is not in the right condition as required by the law.
Cleaning, Care and Maintenance
To attract tenants, it is necessary to keep the house looking good and to have everything in good working order. Maintenance costs are continuous because once a tenant leaves you should prepare the home for the next occupant. Leaky toilets and faulty wiring systems are things you cannot take for granted while managing a rental home. Note that all these charges you will have to pay out of pocket. The environment within the home also needs cleaning, so you should have a budget that caters for this.