As a landlord, one of your biggest tasks and responsibilities will be to effectively controlling and estimating expenses related to your properties. Several costs are involved with owning or managing a property, including mortgage payments and ongoing maintenance and repair expenses, so it’s crucial that these are effectively managed at all times. Here are some costs that many landlords underestimate, along with some information on managing them.
Although most landlords will have to deal with vacant properties from time to time, several new landlords underestimate how serious of an impact it can have on their finances. Empty properties don’t generate any income, meaning that landlords will be losing out on cash flow and overall profitability.
Although there’s normally a gap in the time where a tenant moves out and the next one moves in, most new landlords don’t realize that a property can sometimes remain unoccupied for two to three months before suitable tenants are found.
Post-tenant Repairs and Cleaning
Regardless of now neat and tidy a tenant is, there will usually still be some cleaning and repair work to do when they vacate the property. While you may be able to recoup all or some of this from a tenant’s security deposit in cases where negligence has been confirmed, you’ll usually end up having to cover these expenses from your pocket otherwise – which can amount to hundreds of dollars.
It’s easy for landlords to assume that their properties will require little to no maintenance if they’ve been built recently or been renovated. However, unexpected issues can crop up on new as well as older properties – which could become costly.
Other maintenance such as cutting lawns, clearing garden beds, painting the inside and outside, having appliances inspected, replacing furnace and air-conditioner filters and any other type of repairs will also cost money, and as such, should be budgeted for accordingly.
Unexpected damage can not only be caused by natural disasters such as flooding, hurricanes, tornados or even hailstorms; reckless tenants could break windows, appliances and other fixtures or even permanently damage carpeting – all of which will be expensive to repair.
Managing Unexpected Expenses
One of the first steps to take as a landlord when calculating potential future expenses is to rather overestimate. For example, if you think you’ll need $500 to cover some upcoming expenses, rather set aside $600 or even $750 instead. If the cost comes out higher than your initially planned amount, you’ll have enough to cover it and if the costs are less than anticipated, the balance can always be placed into an emergency account that is set up specifically to cover unexpected expenses on your rental property.
In some cases, insurance may be available for landlords that will help offset the high cost of unexpected repairs and maintenance. Although it may not be possible to plan ahead and anticipate every unexpected expense for a rental property, landlords can use the above-mentioned information to ensure that they are as prepared as possible.