4 hidden costs of being a landlord
- Costs associated with rental properties may surprise new landlords.
- Tax and insurance costs often rise for property investors.
- Other costs include legal fees and cleaning costs.
However, many costs associated with rental properties catch novice landlords by surprise. The following are four hidden expenses experts say new landlords should consider.
1. Increased insurance costs
For example, homeowners who cannot sell their homes should be aware that renting out the home changes the owner’s status from primary occupant to “investor,” says Brian Mikelbank, an associate professor of urban studies at Cleveland State University, in Ohio.
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As a result, it costs more money to insure the home with a special landlord insurance policy. According to the Insurance Information Institute, the premium is about 25 percent more than with typical homeowners insurance.
The tenant rent payment may help cover the increased expense, but Mikelbank says landlords shouldn’t always count on it.
“Homes will usually have tenants for less than 12 full months out of the year, since it takes time to find a renter, or a tenant could potentially leave before their lease is up,” he says.
2. Legal fees and administrative charges
Landlords should budget money and time for getting legal advice, learning their rights and drafting rental agreements, says Lisa Sevajian, a Realtor in North Andover, Mass.
“Some attorneys will charge a flat rate of about $200 for landlord services,” Sevajian says. Other lawyers may charge by the hour.
Owners should also be prepared to pay for additional work if a tenant needs to be evicted, or there is some other legal dispute, she says.
Property management companies can handle these tasks for the property investor, but typically charge about 10 percent of each month’s rent for their services.
“The city will send out an inspector to make sure the property is up to code,” Mikelbank says.
Written by CREDIT