Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
11y
Your biggest cost is TURNOVER and vacancy. So tenant/prescreening is crucial to success in this business. All other expenses pale in comparison when you have no tenant and the unit is costing you money every month (even if it's free and clear because you still need to pay taxes, insurance and some utilities specially in the winter).
Investor · Bloomfield, NJ · Member since 2015 · 207 posts · 121 votes
11y
Hi Renardon
I don't really have a list of the Top three properties, but I do have a top one. It would be plumbing issues due to old or clogged pipes or sewer lines.
I have two properties. One was completely rehabbed pipes and all. When the tenants moved in, they were advised of this and told that any plumbing clogs or issues are on them. My other property was not a rehab and I had plumbing issues there due to clogged sewer lines because the tree roots grew into the sewer lines under my front yard. Every year the plumbing company was there with the whoosie whatsit clearing out the sewer lines and cutting through the roots. Finally, I decided to put a sewer liner in and I have been problem free ever since.
I have learned that if I am going to rehab, i am going to do it top to bottom so that I have a clear mind as to what is wrong and fix it from the get go. Aside from a Hurricane Sandy rebuild, I have been maintenance free for 4 years.
I looking to get a consensus of what is the top 3 biggest cost for rental properties owners occur on a consistent basis?
It depends on where you're investing. I would agree with David, although I don't have the lawn maintenance expense to worry about. Property tax could be a potential high cost, depending on where you invest. I ran into an issue with my Heating/A/C unit, which is going to cost me a large amount of my profits this year. Not looking forward too the repair cost.
Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
11y
Your biggest cost is TURNOVER and vacancy. So tenant/prescreening is crucial to success in this business. All other expenses pale in comparison when you have no tenant and the unit is costing you money every month (even if it's free and clear because you still need to pay taxes, insurance and some utilities specially in the winter).
I looking to get a consensus of what is the top 3 biggest cost for rental properties owners occur on a consistent basis?
Outside of taxes and insurance, I can't think of any recurring major costs. And in my case, neither is a great expense anyway.
As mentioned, plumbing could be a recurring cost if the landlord doesn't ensure the plumbing is in great shape during rehab. If there is a doubt that the plumbing might be imperfect, you'll have a lot of repair calls and costs.
HVAC repair should not be a recurring cost. If it is, my opinion is the unit should be replaced. The roof should not be a recurring cost. Neither should appliances be a quickly recurring cost, though some tenants may be rougher than usual on appliances. I have SFR and ensure via the lease that tenants are responsible for lawn maintenance, so that's not an expense for me.
The only possible big recurring expense might be turnover expenses. If a landlord has a lot of short-term tenants for only 3-6 months as a time, there may be extra clean up and repair costs associated with get the unit ready for new tenants. Not to mention that the unit may sit empty for a month between tenants before it is rented again.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
11y
There is one worse than vacancy - the non-paying tenant occupant; you feel the same expenses as when vacant, and then some (eviction isn't free), plus you can't even do the turnover and find new tenants. I used the term "economic vacancy" on the BP forums before to coin a term for this ...
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
11y
Taxes #1. Insurance #2. These are guaranteed and consistent expenses. I would probably rate maintenance #3. You can control insurance expenses by adjusting your level of coverage. Taxes...you have very little if any control over and depending upon the area, can be quite expensive.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
11y
I would agree with tenant turnover. The most expensive piece of which is interior paint. I don't love to paint but I usually take that on myself to cut costs.
Professional · Yona, Guam · Member since 2014 · 62 posts · 30 votes
11y
Vacancy, turnover, and not enforcing your lease (late fees, evicting, documentation, pets, inspections, violations, and more). I listed that as my third one because it leads to most of the big expenses including vacancy, rent loss, and turnover.
Most landlords already have a good lease, they just don't enforce it.
Investor · Roanoke, VA · Member since 2012 · 1k+ posts · 374 votes
11y
vacancy,evictions,the morgage payments for lots of investors and property management taxes also and insurance sorry more than 3 good luck @Renardon Calhoun
Real Estate Investor · Odessa, FL · Member since 2015 · 66 posts · 15 votes
11y
Has anyone thought of investing in Home Warranties? Most leases have a clause that "the tenant is responsible for X repairs". With a Home Warranty, the tenant is more likely to get things fixed and not procrastinate and allow them to fester and it limits the cost above the service call to the owner. Call backs are on the Home Warranty company.
I got one for our house because I did not want to be poking around the washing machine!
Every year the plumbing company was there with the whoosie whatsit clearing out the sewer lines and cutting through the roots. Finally, I decided to put a sewer liner in and I have been problem free ever since.
This cracks me up. It was a Snake with a Root Auger.
Doesn't hurt to get a sewer camera down those pipes and take a good look on a potential investment.
That way you know for sure whether you need the "whoosie whatsit " or not.
Has anyone thought of investing in Home Warranties? Most leases have a clause that "the tenant is responsible for X repairs". With a Home Warranty, the tenant is more likely to get things fixed and not procrastinate and allow them to fester and it limits the cost above the service call to the owner. Call backs are on the Home Warranty company.
I got one for our house because I did not want to be poking around the washing machine!
And you did bring up a great point. I should call the plumbing company to come out with a video camera just to make sure that my investment is paying off.
Investor · Williamsburg, VA · Member since 2015 · 20 posts · 3 votes
11y
For me, bring a passive, out of town investor, the biggest expense is by far property manager commissions. But, you get what you pay for, and I've been reasonably happy with all of them over the years.