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What are Variable Expenses for Rental Homes?

By: Gregg Cohen, CEO, JWB Real Estate Companies
December 26, 2013
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Purchasing a property that is used as a rental home comes with a set of expenses that can change over time. The initial purchase price is a fixed price point of a property although there are variable expenses that are often paid by property owners. Knowing what are variable expenses for rental homes and how to avoid huge increases could help investors retain more profits each year.

 

4 Examples of Variable Expenses for Rental Properties 

There are common types of variable costs that property owners can pay annually based on the amount of services needed to maintain the property. It is possible that prices could decrease for some expenses although most prices increase upwards due to uncontrollable economic factors.

1. Contractor Fees for Repairs

The total costs of upgrading a property includes the work performed on the interior or exterior when problems are found. Small investments inside of a home like new paint or drywall still add to the variable costs of repairs. Materials increase in cost each year as well as the fees that contractors charge to perform work inside or outside of a home. Working with a property management company that features a growing list of contractors could help decrease the amount of variable contractor costs.

2. Property Taxes

Many counties in the United States increase taxes every year or biannually based on developed budgets. A small mill increase could cost hundreds of dollars in property taxes if a home increases in value. Most homes are assessed annually calculated by the agency appointed to complete property assessments. Property taxes always includes the land value, structure value and other fees that are variable in the county where homes are located.

3. Property Management Fees

Property managers are generally appointed to control the day-to-day business management of a property. Handling complaints by tenants, collecting monthly rent and hiring contractors are portions of the work that is performed and is payable in advance. Monthly fees that are usually charged by management companies can rise each year based on staff improvements, economic changes or others costs of doing business that can affect the management costs payable.

4. Accounting Fees

Taxation in the rental homes industry can vary depending on the state where a property is owned. Taxation at the federal, state and county level can change annually based on a number of factors. Accounting is one necessity when income is generated from a rental home and these fees can rise each year. Many rental property owners seek the services of a CPA to help maximize deductions and minimize payable taxes for owned rental properties.

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