Now that you have your first property, you now seek ways to ensure your return on investment. Know that there’s more to just managing a rental property. Quite frankly, it’s not as easy as you think it would be. As a first time landlord, you should understand the expenses that come with managing your rental property.
About Property Management
After you purchase a real estate property, you probably thought that the next thing to do is to get it rented or any activity that would reap monthly profits. But before you have the property rented, you have to fix the papers first. And these are the insurances, contracts, taxes, and other homeowner expenses.
Elements of Property Management
All in all, property management takes into account the operation and monitoring to make the business running. The following are the elements:
Maintenance
Maintenance costs eat a big chunk of the total expenses. Be informed that this may take half (roughly) of your monthly income. One reason is that you pay for labor, utilities, repairs, pest control, etc. Aside from the monthly maintenance, other variables such as season maintenance or emergency maintenance may occur. There is no way to know how much will be spent on repairs because it depends on the purchased state of the building. Old buildings certainly require more maintenance than newer buildings.
No one knows what the future holds. As you collect a monthly payment, you should allocate a percentage that will go to a savings account for emergency reasons. These emergencies could be any of the following: sudden damage to the appliances due to wear and tear, electricity faulting, abrupt breakdown, etc. The usual percentage is 1% of the monthly payment.
Insurance
Get insurance as soon as you finished purchasing a real estate property. Insurance can cover monthly expenses for a few months should there be an accident or job layoff, etc. For first-time landlords, a recommendation is to get property-casualty insurance for belongings that may be ravaged by fire or natural disasters.
Taxes
The property will be taxed without fail. Though you have paid many types of real estate taxes as you sealed the deal, it will never end for you until another owner takes over. Yearly taxes on real estate depend on your location and the assessed value of that property.
Conclusion
Property management of your real estate property is crucial from the beginning until the end. You must protect the property from damage to attract future buyers or future tenants. If you are ready to have what it takes to manage your rental property, then you can start accepting tenants.