Determining how much rental income an investment property will bring is easy, but figuring out how much will go into your pocket is another thing. Before deciding if investing in a property is worth it, you have to get a clear idea of the operating costs. Down payments and closing costs are one thing, but the recurring costs are what tend to eat away at your profits. Take a look at the recurring costs of owning a rental property to help make the best investment decisions you can.
Mortgage Payments
You can count on making a mortgage payment once a month, and this will be your biggest recurring expense. A mortgage payment will include the interest rate and your annual percentage rate (APR). Plus, you have to keep in mind that interest rates on property loans are typically 1 percent higher than loans for primary residencies. For example, say a single-family rental was 120,000 dollars with a 20 percent down payment and an APR of 5 percent with a 15-year repayment term. In that case, you would spend around 560 dollars a month in mortgage payments.
Rental Property Insurance
Landlords need rental property insurance if they want to stay out of unnecessary legal trouble. The issue is that insurance costs vary widely depending on the dwelling coverage, reimbursement method, crime risk, environmental risk, add-ons, property type, and more. There is no solid number regarding the average cost of landlord insurance. However, landlord’s insurance tends to be 15 percent more expensive than homeowner’s insurance.
HOA Fees
Many homeowners see HOAs as a frustrating hurdle, but for landlords, they’re necessary and often very helpful. Landlords should try to find properties with HOAs because these bodies help set a standard, keep the community in top condition, and often offer amenities that attract tenants. The tricky part is that HOA fees vary widely from state to state, with some prices going as high as 500 dollars a month. The good news is that the general average seems to fall at about 100 to 200 dollars a month. Overall, when we look at the recurring costs of owning a rental property, the cost of HOA fees is not nearly as high as other fees can be.
At Excalibur Homes, we understand the importance of having quality, affordable management and leasing services you can rely on. That’s why we’ll work with your budget to provide you with a service package that meets your needs. Let us take some of the weight of being a landlord from your shoulders!
