{"id":76588,"date":"2016-01-27T11:05:33","date_gmt":"2016-01-27T18:05:33","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=76588"},"modified":"2024-02-19T07:56:04","modified_gmt":"2024-02-19T14:56:04","slug":"2016-01-27-rental-property-expenses-2","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2016-01-27-rental-property-expenses-2","title":{"rendered":"3 Rental Property Expenses Investors Should Always Anticipate"},"content":{"rendered":"

The stories surrounding the beauty of receiving passive income through rental properties are often enough to get an\u00a0investor\u2019s heart pumping. However, the increase people owning a whole selection of rental properties but filing for bankruptcy has left me with a dual opinion regarding rental properties (especially during the downturn). <\/span><\/p>\n

On one side, it seems like a promising endeavor, as it looks like the kind of investment that could help you generate a lot of passive income — but on the flip side, there certainly seem to be a lot of hidden costs that people are initially unaware of, not to mention a lot of unknown risks factors at play. <\/span><\/p>\n

While everyone knows about the advantages, such as a consistent flow of passive income and property income growth, many people forget about some of the costs\u00a0associated with rental properties. Therefore, in order to help you to really get a feel for the overall deal with rental properties, here is a list of some costs\u00a0associated that you should\u00a0keep in mind when you decide to take that first step into real estate investing.<\/span><\/p>\n

\"HELOC-deduction\"<\/p>\n

Related:<\/strong> How to Estimate Future CapEx Expenses on a Rental Property<\/a><\/em><\/p>\n

3 Rental Properties Expenses Investors Should Always Anticipate<\/h2>\n

Unexpected Repairs<\/h3>\n

OK, so while the possibility of earning some passive income sounds great, I feel like I have to remind you that simply buying a property and then renting it out is not the end of your work. It will take a lot of effort to continue the upkeep of a property and to\u00a0keep on top of repairs. This is absolutely critical, as small issues may lead to bigger ones if they remain unresolved. <\/span><\/p>\n

In addition, if you’re unlucky enough to meet some big ticket item repairs, i.e. a furnace coming under fire unexpectedly (did you see my play on words?), it might just end up destroying your cash flow for the year. This is especially true if you are utilizing leverage, and the truth is you will very likely move from positive cash flow to possibly coming out-of-pocket — and we don\u2019t want that, do we?<\/span><\/p>\n

Disaster Tenants<\/h3>\n

I don\u2019t think that I even need to say this, but here is a short reminder anyway. There are no guarantees surrounding tenants, so even with the most seemingly amazing of renters, receiving payment is never a 100 percent guaranteed fact.<\/span><\/p>\n

OK, sure, perhaps you will find one amazing renter who\u00a0always pays their rent on time month after month, but even so, they are like a clock — you never know which day they will stop ticking. Not to mention, there is no doubt that there are some renters out there who\u00a0are full of lame excuses as to\u00a0why they can\u2019t pay, and all that time you put into their evicti<\/a>on<\/a>\u00a0along with the money lost from unpaid rent will surely cause some major frustration. As you move up or down in different property classes, this risk can be minimized or increased\u00a0but never quite eliminated.<\/span><\/p>\n

\"tax-efficient-business\"<\/p>\n

Related:<\/strong> 12 \u201cHidden\u201d Real Estate Expenses That Blindside Investors<\/a><\/em><\/p>\n

Taxes, Fees and Insurance<\/h3>\n

It doesn\u2019t matter whether or not you have tenants residing in the house because either way, you will fall prey to the cost of homeowners’ association fees, property taxes and insurance associated with the property.<\/span><\/p>\n

While this comes as\u00a0no surprise and you will probably be warned about it way in advance, this is definitely a cost that will cut deep into your pockets. Not to mention, if you don\u2019t have a steady income coming from renters, these costs (which by the way are not insignificant) are most certainly going to get personal. \u00a0<\/span><\/p>\n

There are risks associated with just about everything in life. Do not let the simple fact that they exist\u00a0discourage you from making the leap in this industry. Real estate is very lucrative and has plenty to offer!<\/p>\n

Investors: What would you add to this list?<\/em><\/p>\n

Let me know with a comment!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The stories surrounding the beauty of receiving passive income through rental properties are often enough to get an\u00a0investor\u2019s heart pumping. However, the increase people owning a whole selection of rental […]<\/p>\n","protected":false},"author":12140,"featured_media":76679,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4241],"tags":[],"class_list":["post-76588","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-business-management"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/76588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/12140"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=76588"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/76588\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/76679"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=76588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=76588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=76588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}