This is an incredible time for investing in real estate and locking into passive income and long term wealth building by acquiring rental properties. However, while cash flow spreads may be fatter than ever and we appear to be on the verge of an extended period of equity growth it is those sneaky, unexpected expenses which catch investors out every time.
So when investing in real estate through rental homes what are some of the most common expenses that investors often overlook?
1. Exterior Maintenance
You may have budgeted for cutting the grass or plan to make the tenants responsible for it but exterior maintenance doesn’t end there. You might not care what your properties look like if you aren’t living there but the city or homeowners association will. That means hefty fines and penalties if not maintained to code. Other items you need to plan on forking out for include pressure washing and painting.
2. Appliances
So many investors forget to plan for big expenses like appliances. They are so consumed with just getting the deal closed and collecting the rent money that when appliances go bad it can come as a big and nasty surprise right at the wrong moment. These are one of the items which a reserve account should be set aside for and contributed to monthly. Some real estate investing pros have found investing in a home warranty plan the best move.
3. Re-Leasing
Despite the best screening in the world things happen and tenants leave, sometimes a lot sooner than planned. This brings additional expenses including repairs and redecorating as well as marketing and sometimes commissions too.
4. Professional Property Management
Regardless of if you want to try your hand at managing your own rental properties at some point you are going to want to hire a property manager. Otherwise you’ll never truly have a day off or be able to enjoy your real estate investing profits. Give DIY property management a try if you like, it will be a great learning experience but make sure you have budgeted enough room to hire someone else later on.
