Have you thought about earning money with real estate investments? I have been thinking about it a lot lately. I’ve spent several hours searching realtor.com for the perfect find in the perfect area with the perfect price. To date, I have also thought about what kind of decor and style I want and looked up how much money I could make. One thing I have not spent enough time on is the unforeseen expenses of becoming a landlord. I began a little research on the topic, and here is what I found:
Cleaning and Maintenance
As a landlord, you still have some responsibilities. Just like an apartment complex, you are responsible for most maintenance issues. This means, when something breaks, you need to get it fixed as soon as possible. Some issues could be as simple as changing lights. Major issues could mean replacing water pumps and heaters. Alongside maintenance, you need to have the place professionally cleaned after a move. This includes new paint and landscaping to attract new tenants.
Just like with your primary residence, your rental property must be insured. You may think you know the estimated costs, but do not be fooled by what you are paying on your own home. Landlord insurance typically costs between 15% and 20% more. Be prepared to count this increase in your budget.
To make money on your rental, you have to rent it. There are times when a renter moves or you have to evict. The time between the tenant leaving and bringing a new tenant in, the unit will be vacant. Utilities must be on during this time, and you must still cover the mortgage. Because the unit is vacant, you will be footing the bill. You need to make sure you finish up and cleaning and refreshing the unit, advertise and market it, and get someone in it before it becomes a financial burden.
If you are like me, you may be thinking of buying out-of-state property. You may even just want to be hands-off. To do so, you may have to toy with the idea of hiring a property manager. They are responsible for helping to maintain the property, handle rent, and other perennate tasks for your operation. If you want a hands-off approach, hiring a property manager may be the right fit but beware, the cost can be up to 12% of the monthly rental value.
There are many other things you have to be mindful of, like HOA fees and the cost to keep on utilities. Renting out property is not just a money machine. There are some unforeseen expenses of becoming a landlord you should familiarise yourself with to aid in your success.