Understanding rental property operating expenses is necessary for helping to determine ROI (return on investment). Not all income from a rental can be considered profit since some of it needs to be spent on operating costs. Let’s discuss the most common expenses of owning a rental property and maintaining it well.
The only way to find renters is through advertising and marketing. No matter how it’s done, this will create a monthly bill.
Property Taxes and Insurance
Most property owners have a home of their own that they live in and have to insure and pay taxes for. Unfortunately, that doesn’t negate your property tax and insurance responsibilities for the rental property you own.
Renters are not responsible for taxes and insurance—the owner is.
One of the benefits of renting is having the ability to call someone else (property management) to come and fix things.
If you own the property, maintenance is your responsibility. If an appliance breaks, you must fix or replace it as soon as possible. Renters are counting on a safe and healthy place to live.
Each rental situation varies as far as what utilities (electric, gas, water, etc.) are paid for. But most often, renters do not pay all utilities; the property owner will have to pay for the ones not covered.
Trash pickup has to be covered, and if not agreed upon for the renters to do so, then it’s covered by the landlord.
Professional Property Management Services
Rental property operating expenses become easier to manage when a professional property management service is involved.
Using property management allows the owner of the property to not have to take care of things like maintenance issues or even collecting rent. However, the property owner is still responsible for any expenses as mentioned above and also for the fees for the management service, making it an operating expense.
This is one that can easily go overlooked until the snow starts falling or the grass needs mowing.
The owner needs to maintain the general landscaping—not just the grass, but trees, flowers, etc.—not the renters.
Whether hiring a service or maintaining the landscaping and snow removal yourself, they are both operating expenses to consider.
In conclusion, investing in real estate is well worth it. Don’t let operating expenses scare you from deciding to take the plunge. Have a clear understanding of what they are, look at what will be coming in, and subtract approximately what will be going out. If there is a profit or looks to be one down the road, then owning property for the sake of renting it out may be worth it for you.
Excalibur Homes, your property management company in Atlanta, GA, was recently awarded the honor of “Best in Georgia.” We offer full-service property management services and our passion shows in all that we do. Your successful investment properties are our success too.