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You can live the American dream when you buy investment properties. The monthly rent can flow into your account to earn back the investment that you made. You can take these funds and make new investments or do something nice for yourself or your family. Before you start investing, educating yourself about the cost of evicting tenants from investment properties will help you plan for these unfortunate circumstances. Being a landlord or taking part in mangement decisions of your investment property are some of the responsibilities that you must deal with as a real estate investor. Learning the ways to avoid unnecessary expenses and maximizing your profits will get you one step closer to financial independence.
Missed Rental Payments = Lost Profits
While it sounds simple to comprehend, a deeper look into the financial impact of missed rent payments may surprise you. Due to landlord-tenant laws, you cannot simply make a phone call or in-person visit to your rental property and demand payment for past due rent. There is a process that must be completed for every eviction. State laws give protection to both tenant and landlord and violating one of these laws can come with severe financial penalties or incarceration.
What you should know is that the process is lengthy to evict a tenant. The time period between the months of lost rent, filing an eviction notice in court and the serving of the eviction notice by a county sherfiff can take several months. It is not uncommon to be out 4 to 6 months of rent before a tenant is actually forced to vacate the property.
Example Eviction Expenses:
Monthly Rent: $700
Missed Monthly Payments: 3
Court Costs and Attorney Fees: $300
Tenant Appeal: 1 week
Notice Served by Local Sherif: $45
Court Judgement: 1 month
Sheriff Removal: $100
Total Cost $3245
Repairing Damages After Eviction
Disputes with tenants can and will happen at some point during your career as a real estate investor. The cost of eviction is separate from the cost of any repairs that must be made if damage is found after eviction. Holes in walls, windows, repainting and new carpeting are some of the most common types of repairs. You have the option to try and recoup money for repairs by filing legal action against a tenant, but the majority of tenants are hard to find after they have been evicted. The additional expense of court costs can easily balloon the cost to evict a tenant from your property.
How to Avoid the Cost of Evicting Tenants
Property managers are one of the best investments that you can make when renting out your investment property. It does not matter if you live in state or out of state where your property is located. A great property management company wil be able to screen tenants before signing a lease to help avoid renting your property to a deadbeat tenant and racking up huge losses. The small monthly fee that is charged for excellent property mangement is tax deductable each year and will help protect your investment.