- December 17, 2020
- Posted by: Editor
- Category: Advice
We understand how the process of investing in income rental property goes beyond the expenses advertised and so in this article, we will be enlightening first time real estate investors on the hidden costs of buying a rental property.
Cost of Home Repairs
As a landlord, when things go wrong in the house the tenants will be looking to you for assistance and decision-making. It may be as simple as a new part for a washing machine or it could be more complex like flood damage from a broken pipe. As a landlord you will be obligated to ensure general household maintenance and with most unpleasant surprises in life you won’t know when they are coming. Rule of thumb says that one percent of your home value should be set aside for home repairs per year, this is assuming that you have responsible tenants.
Cost of Home Inspections
Inspections might seem pricey but seeing as a buying rental property is usually the largest investment you are likely to make. Home inspections are your opportunity to ensure that there are no hidden issues that could be difficult or costly to repair later and should be done before closing the deal. From an investment perspective, you want to make sure your money is going into a sound purchase.
As with everything in life, signing of contracts and deals involves the exchanging of money you never thought of. These costs include processing fees from agents, recording fees, underwriting fees and title insurance fees and so on. We recommend you discuss these costs with your estate agent so you know how much additional money you require so you stay within budget and get the most value within your budget.
Additional Costs and Moving Fees
If you decide to use your investment property for short lets or as being furnished you will have to invest in furniture and other amenities to compete with other listings. Amenities will influence your occupancy rate; guests are demanding certain amenities when renting a property short-term.
Take into account where your cash flow property is located and any environmental risks that could occur, for example are you near water or on a known flood plain? You might want to consider flood insurance as an additional investment. Insurance may sound like an unnecessary add on but costs of fixing or replacing things can be incredibly expensive. Remember to also encourage your renters to get contents insurance regardless of how safe the neighbourhood is, sentimental value can’t be replaced but other items can be.
Cost of Utilities
In a world with rising costs, utilities can often far exceed what most expect. Are you including utility costs into your rental price, make renters pay it directly themselves or cover it yourself? When thinking about this consider that you have no control over how much your renters turn their heating on. It’s often easier to charge a standard fee upfront or encourage them to deal with bills directly by offering them a lower rent.
If your income rental property is within a gated community or apartment block you are likely to be asked to pay additional monthly fees for general up keep of communal areas. These are often not advertised beforehand but must be paid. Consider factoring the cost into your renting price.
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