To be a successful homeowner or landlord proper preparation for both expected and unexpected rental property expenses is vital. It is quite profitable investing in rental properties, but one needs to understand what is involved and the total cost of purchasing a property. When you plan to buy a rental property, there are some things you should put into consideration like the value of the property, the cost, and the return on investment of the property.
Estimating rental property expenses involves a lot of variables that can be easily left out or overlooked by most homeowners or investors. But thankfully Anthony Wardan gives us tips on how to prepare for the unexpected, check property expenses and also save some cash on rental property.
In most homes, utility cost is part of the monthly expenses. So, it is very important to ask for the average utility bill over the past few months of the property you own or you are about to buy. A high utility bill could indicate defects somewhere and therefore, the need to investigate. Better still allowing tenants to pay for their utility bills will be a good idea as they will be able to use it cautiously.
Rental property expenses should not be underestimated and requires homeowners to anticipate different maintenance needs. Such as appliance maintenance, emergency maintenance, seasonal maintenance and preventive maintenance. Anthony Wardan recommends having a budget of 1 percent of annual rent.
Remember, this is just an estimation as maintenance costs can be affected by factors like the age of the property and the condition of some major systems. Every homeowner is expected to prepare for emergency expenses and plan accordingly for saving money.
Insurance Of Home-owners
Insurance is another expense that is related to rental property. The expenses vary based on region or area and are generally included in the mortgage payment. One needs to be sure that the insurance policy opted for covers fires, theft, ice damage, wind and any other natural disasters.
Property tax expenses are based on the area of the property and levied by the country where the property is located. Home-owners or investors that want to estimate expenses based on property tax will have to contact their country assessor. As they are the ones that will determine property tax based on the area market value.
Many homeowners at some point need help managing their properties, so they consult help from property management companies. Property management companies range in responsibilities such as, collecting rent, finding new tenants, collecting rent, setting rental rates and assigning maintenance.
Property management cost ranges from 8 to 10 percent monthly rent or annual flat fee. Property management companies range and consist of the following: individual property manager, on-site manager, special assessments and condominium association fees. Though seeking their assistance can be costly, they can help add significant value to your investment.
Property expenses range from one area to another and one property to another, Anthony Wardan concluded. There is no specific way to know the value of a rental property. Monthly expenses, either expected or not will affect your profits. So to know if an investment property is good or not, estimation of rental property expenses is very important.
Becoming a homeowner or having a rental property can be a profitable investment if expenses are well monitored. So apart from preparing for emergencies and estimating expenses, knowing how to reduce costs is also good.
Having an idea of why you need to manage expenses, how to manage expenses and a proper record of expenses will help you run a profitable rental property.