Being a landlord can be a lucrative business, but owning a rental property involves a lot of expenses. It’s crucial to plan your budget and anticipate your expenses to avoid overspending.
However, no matter how much you plan your budget, there are hidden costs for operating a rental business that can quickly add up when left unnoticed. These hidden costs will leave you with a sizable bill at the end of the year.
Here are the top ten costs that landlords often overlook and ways to avoid them:
1. Turnover Costs
It can be easy to overlook the costs associated with tenant turnovers, such as advertising, cleaning expenses, and tenant screening. To minimize these costs, consider offering longer leases to retain tenants who have a good track record. It’s also best to be proactive with lease renewals and encourage qualified tenants to extend their stay by renewing their leases with you.
2. Long Vacancies
While turnover costs can be costly, lengthy vacancies are equally daunting. When your property sits vacant for a while, it won’t generate income for you. However, you still need to pay for certain expenses, like utilities, maintenance, property taxes, and insurance.
As a rental property owner, you don’t want to let your property stay vacant for a long period. Make sure to have an effective marketing strategy in place to prevent long vacancies.
3. Maintenance and Repair Costs
Wear and tear on your property is inevitable, and it’s important to be proactive about maintenance. After all, you must provide a habitable dwelling to your renters. While repair and maintenance costs sneak up the most, they are often necessary.
To prevent costly repairs, it’s recommended to create a schedule for routine upkeep and inspection so you can spot any issues early on. This allows you to address repairs as soon as they arise to avoid additional costs down the line.
4. Poor-Quality Tenant
Poor-quality tenants can be costly in the long run. They will not only add to your stress, but they’re often one of the major causes of monetary loss. Bad tenants tend to pay their rent late, or worse, miss payments. Additionally, problematic tenants often fail to treat your property with care. Their negligence can cause property damage that is not part of normal wear and tear.
To prevent bad tenants, make sure to conduct a thorough tenant screening process before accepting anyone into your rental home. Moreover, have a clear policy in place for tenant damage and late payments, as well as requiring a security deposit to discourage reckless behavior.
5. Eviction Costs
If poor-quality tenants are bad for your business, an eviction may become necessary. Eviction is never ideal, but it’s important to have a plan in place just in case.
You need to set aside a budget for filing fees and other legal expenses. Since the process can be tedious and lengthy, consider hiring a lawyer and budgeting for potential lost rent during the eviction process.
6. Legal Fees
As a landlord, it’s important to understand your legal obligations and protect yourself with written lease agreements. While working with a lawyer to draft ironclad leases and address any legal issues that may arise is a good idea, a retainer can add up in the long run.
Make sure to assess your needs for legal counsel and evaluate the services that you require. Decide whether hiring the lawyer on a per-transaction basis is more practical than paying a monthly retainer fee.
7. Your Time and Effort
Being a landlord can be a full-time job, and it’s easy to overlook the costs associated with your time and effort. You need to address tenants’ concerns and ensure that the property remains in its best condition.
On top of that, you need to be constantly up-to-date with the rental market and trends to ensure that your business stays compliant with changes in the rental industry. There is just too much to do if you manage your rental business on your own, leaving you with almost no more time for yourself and for other important ventures.
Consider hiring a property management company to handle day-to-day operations and reduce burnout. Hiring a property manager who is knowledgeable about your local rental market and landlord-tenant law can help you reduce your overall costs and save you time. A professional property manager can:
- Help Reduce Vacancies: With efficient marketing strategies and knowledge of the local market, property managers can help get your vacant property occupied quickly thus reducing turnover and advertising costs.
- Help Find Quality Tenants: Experienced property managers have an established tenant screening process and can easily find the best, most responsible residents for your rental property.
- Help with Property Maintenance: Property managers can help reduce your repair and maintenance costs by conducting regular inspections and routine upkeep, ensuring that your property remains in top condition.
- Help with Legal Issues: The best property managers are knowledgeable about local landlord-tenant laws and employ the right experts to handle issues like a collection for late rent payments and eviction. This way, you can save on costly third-party legal fees.
- Save You Time and Energy: Property managers are there to ensure that every detail about managing your rental property is handled with the utmost care, reducing your overall workload. This way, you can focus on other important things, like building your portfolio.
Overall, being a landlord can be a profitable venture, but it’s important to be aware of the hidden costs that can quickly add up. By understanding these costs and taking steps to minimize them, you can ensure a successful and profitable rental business.
If you need help managing your rental properties, contact the experts at T-Square Properties today!
Disclaimer: This blog article is for informational purposes. The information contained in this blog article may not be the official policies of T-Square Properties.