Rental Property: Additional Income and Expense

Each year thousands of people purchase income property to increase their income. Because many are focused on increasing their income, they don’t always think of the expenses that come with owning rental property. While the profits from owning rental properties may be high and worth the effort, it’s important for potential buyers to be prepared for the expenses that come with it.

Not all rental properties are the same. There are some rental properties that people rent for long periods of time and others that have a high tenant turn-over. As people begin the search for the property that will help build a solid financial future, they should buy with care. Historically, rental property is a savvy move for a solid financial future but it may take a bit longer than some expected.

Forgotten Expenses for Rental Properties

People may buy properties to rent out and make money but there are some expenses that many potential property owners don’t think about. These expenses may not stop those that are serious about buying these properties but they should be budgeted for.

Property Taxes: In many states, property owners have to pay taxes on all property they own. When it comes to property taxes, they can rise and fall each year. There is no way to predict what the property taxes will be for any given year so it’s best for all property owners to be prepared.

Repairs and Preparation: Unfortunately there are many new property owners that think they will be able to immediately rent their property out after purchase. That isn’t always the case. Most properties need to be cleaned, updated and repaired after sitting vacant for a period of time. Those that are not prepared for that will have a delay in renting their property until they are able to finance the preparations.

There are also repairs that have to be done to each apartment after a tenant leaves. Some repairs may be major and others are minor. No matter what, those repairs have to be done in order to get the next tenant in.

Vacancy Expense: Most property owners don’t like the idea of having their property sitting vacant for any period of time. While it’s not ideal, it happens. When there are no tenants, there is no income. Any expenses that have to be paid to maintain the property has to be paid directly by the property owner and many don’t prepare well for that.

Using property as a source of income is a smart decision for those that are prepared for it. It takes time to learn all the details of being a property owner and landlord but it’s something that can be rewarding in many ways. Those that want to buy properties and rent them should be fully prepared for all the responsibilities that come with it.

Rental properties can be a huge income boost for those that take the time to prepare and invest their money in the right home and pay the expenses that come with those properties.

Aug. 7 14'
It really is a peorsnal choice but most landlords go down the interest only route. Unlike your own home, you can sell the property at the end of the mortgage to repay the debt without leaving yourself with nowhere to live! The other reason for landlords taking this route is that in the current climate the rental income is often not sufficient to cover the cost of a repayment mortgage plus the other costs.The main question you should ask yourself is whether you want capital growth (to see the money you invested grow) or monthly income. If you are after monthly income then you should go for interest only as this will give you the lowest payments and the most money in your pocket each month. I am a financial adviser and we own 5 properties ourselves and do not make much money on the monthly income but we are in it for the capital growth over the longer term. Yes we may have mortgages on the properties and therefore don't own the entire property in effect but we do own the part that is unencumbered (without mortgage). An increase in value in the property is what we are after. We have a couple of properties on repayment as they have much lower mortgages on them allowing the rent to still cover the payments but the others are interest only. As remember, you will need to have approx. 15% deposit and I would recommend having at least 6 months rent put aside for any time the propertyis empty or maintenance issues.
Jul. 7 15'


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