Costs That Landlords Don’t Notice They’re Accruing

Investing in real estate is a surefire way to ensure financial stability and a more comfortable retirement. Owning a rental property will allow you to earn a steady passive income every month. However, most people underestimate the full scope of expenses associated with renting out a property.

Beyond the initial purchase price or mortgage payments, rental properties accrue various costs that can significantly impact their profitability. These costs include property management fees, utilities, insurance premiums, and even routine maintenance.

In this article, the experts at Howzer Property Management will go over the hidden expenses landlords often overlook. Keep reading this article to discover how you can minimize your operational costs and improve your bottom line!

Mortgage Payments

Getting a mortgage loan can be a great way to finance your rental investments. However, monthly mortgage payments can eat a big chunk of your rental earnings.

Plus, if your rental rates aren’t enough to cover your mortgage payments and your operational costs, you’ll end up with a negative bottom line. So, before renting out your property, you must crunch out the number to ensure that what you’ll be charging for rent will be enough to cover these costs.

Utilities

In some states, landlords are required to cover certain utilities such as water, sewage, or trash removal, adding to their monthly expenses. If this is your case, make sure to budget appropriately for utilities. Otherwise, you risk basic services being cut off, which can negatively affect your tenants’ quality of life.

Maintenance and Repairs

Landlords often overlook the ongoing costs of maintaining their rental properties. Routine maintenance such as HVAC servicing, plumbing repairs, and landscaping upkeep can be incredibly costly. Emergency repairs such as roof damage, leaks, broken pipes, and electrical hazards, can quickly eat up your earnings.

Luckily, landlords can greatly minimize maintenance issues and emergency repairs by conducting regular property inspections. By periodically evaluating the condition of your property, you can identify and address maintenance issues before they escalate, saving hundreds of dollars in vendor bills.

Long Periods of Vacancies

A vacant rental property signifies a loss of income. Longer periods of vacancies tend to make landlords incur unexpected expenses, such as utilities, repairs, and cleaning costs. Also, advertising costs to attract new tenants can quickly add up.

Even if you’ve signed a year-to-year lease, you must set some money aside for vacancies. This will help you ensure that you have enough funds to cover mortgage payments, utilities, marketing costs, and maintenance while trying to find new tenants.

Property Management Fees

Many successful real estate investors decide to partner with property management companies. After all, this allows them to focus on growing their portfolios while having the peace of mind of knowing their properties are well cared for.

However, most landlords tend to overlook the fees associated with this service, including leasing fees, management fees, and maintenance coordination costs.

If you’ve decided to hire a property manager, take the time to shop around to find a company with fair prices and quality services. If your property is located in Massachusetts, consider partnering with us!

At Howser Property Management, we’re ready to take care of all your property management needs, without any hidden management fees!

Insurance Premiums

Investing in landlords' or homeowners’ insurance is a great way to keep your investment protected. After all, most insurance policies cover property damages, flooding, loss of rental income, and even provide personal liability coverage.

Despite its many benefits, insuring your property can be quite costly. That’s why you should shop around to find the best insurance for your property’s needs and your budget. You should regularly review your insurance policy to ensure adequate coverage for the property and liability protection and explore options or discounts to reduce premiums.

HOA Fees

If your rental property is part of a homeowner’s association, you will be responsible for paying HOA fees, which cover amenities and maintenance of common areas. While being part of a HOA can mean a better quality of life for your tenants, it can also lead to more expenses for you.

When looking for potential properties to invest in, make sure to ask whether the property is part of a HOA and, if it is, how much residents pay in fees. This will allow you to budget for this unexpected expense more appropriately.

Tenant Turnover Costs

Each time a tenant moves out, landlords may need to invest in cleaning, repairs, renovations, and marketing the property to attract new renters. This can be a substantial expense, especially if none of your tenants stay for the long term.

You can minimize turnover costs by focusing on tenant satisfaction and retention. Offer incentives for lease renewals and address tenant concerns promptly. Investing in property upgrades or renovations can also enhance tenants' quality of life, reducing the turnover's ratio.

Bottom Line

Owning a rental property costs more than most people assume. There are many hidden expenses that landlords must cover to run a successful rental business, including mortgage payments, marketing costs, insurance premiums, property management fees, and tenant turnover costs.

Identifying and knowing how to reduce these costs is essential for effective financial planning and sustainable property management.

Do you need help figuring out how to improve the profits of your Massachusetts rental? Contact Howzer Property Management today! Since 2017, we’ve helped countless Massachusetts property owners increase their income and decrease their stress. And we’re ready to help you too!