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Some investors spend months figuring out the exact cost of an investment property before purchase. Any serious investor performs research and will have a better than a general idea of how much money will be put out. There are fixed expenses that are part of any rental property. You can have a budget for repairs, water leaks and insurance and feel confident that your property will be protected. There are some hidden expenses you encounter with investment property that you might not be aware about. Buying investment property can have additional expenses that you do not expect upon purchase. Being informed and prepared in advance can help you beat any challenges that are ahead.
Hidden Expenses of Investment Property
Owning a property will usually require some type of insurance coverage apart from severe weather damage. Some beginning investors could be misinformed about what insurance does and does not cover when a problem happens. A homeowner's insurance policy typically protects against damage to the structure and may or may not provide damage to loss of personal property. When you are renting to a tenant, you could be responsible for loss to your property and any losses incurred by a tenant. A landlord insurance policy can protect you with legal fee coverage, loss and damage coverage specifically for you. The standard policy could add hundreds of dollars a year to your expense budget.
Keeping your investment property looking nice inside and out is one of the keys to a successful landlord-tenant partnership. Part of the maintenance that is required on your property has little to do with what you can see. Problems can be severe with things that you cannot see like pests. Tropical climates can have increases in pests compared to other parts of the country. Pests like spiders, rodents, ants, bees and bed bugs can be more common and cause damage to your home. A standard routine is to hire a pest control company to protect your property every two to three months. The cost of pest control services can vary and will easily add about a thousand dollars to your annual property expenses.
When you buy an investment property, you are taking the word of the seller or the turnkey company where you make your purchase. The size of the lot that your property is located was likely surveyed many years ago. Economic developments in the neighborhood could have expanded since the initial survey. To make sure you are paying the right amount of property tax, it is a good idea to have your property surveyed every four or five years. The records that taxation authorities keep could be outdated quickly. The cost of property surveys can increase the miscellaneous expenses for your rental property.
Knowing what you are getting into when buying an investment property can help you manage your profits. Many investors do not do enough research before making a purchase and end up spending much more money than they originally planned to spend.