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When you purchase investment properties, there are certain expenses that are fixed and other expenses that can happen unexpetedly. Part of your rental income that you earn must be allocated to paying for these expenses. Some investors make bad decisions and do not plan for unforeseen events that can put a huge dent into their financial health. Before buying investment properties in Florida, having an overview of what expenses to expect can save you from difficulties that you might experience as a real estate investor and landlord.
Common Expenses Incurred When Owning Rental Properties
Maintenance and Repairs
Not every property is in perfect condition before you purchase it. The large percentage of foreclosed properties and houses in distressed condition can have problems that must be repaired. The cost of completing these repairs can vary depending on the contractor that is selected. Things such as pest control, roofing problems, plumbing issues and electrical problems are common with rental properties. As a landlord, these types of expenses can happen without a warning and setting aside a portion of rental income to cover these expenses is always a good idea.
Every home is levied with county or municipal taxes on an annual or bi-annual basis. The value of the property is one of the factors that are taken into consideration when taxes are calculated. The location of the property can also impact the amount of taxes that you will have to pay as a property owner. Taxation can be higher for properties in lake districts, beach districts and private communities. When you are considering the purchase of a rental property, it can be helpful to do research on the potential property tax that could be assessed on the property.
Landlord and Liability Insurance
Whether you buy real estate as an individual or a corporation, protecting your business and personal assets from lawsuits is important. The premiums for landlord and liability insurance can be expensive if you do not shop around and get the best policy for the coverage that you need. Not every portion of an insurance policy will apply to your investment needs. Every policy can be adjusted if your business needs change. Protecting your personal and business finances is important when you become an investor and rent your properties to tenants that could crate potential for liabilities.
The rental income that you earn from real estate investing is considered taxable. As a landlord and property owner, you will be responsible for paying your share of federal taxes. Portions of your income might be eligible for tax dedictions or depreciation. Consulting with a qualified accountant or tax attorney can help you plan in advance for annual tax filings to help you reduce your taxes payable. This can help you to earn more money and grow your real estate investment portfolio.