What’s your biggest expense as a real estate investor?

104 Replies

Whether you own 1 or 100 investment properties I'd love to get your answer.

Thank you kindly, Suly

Mortgage interest. OK, so maybe that wasn't the answer you were looking for...

Excluding updating/remodeling, it would likely be plumbing and issues caused by plumbing problems. There is always a clogged drain or leaky pipe or fixture that needs to be replaced. I had a toilet leak and it caused damage to the walls, ceiling, and a light fixture on the floor below. Had it all fixed and a few months later another toilet leak  from a different issue damaged the exact same area that I had repaired. This was after I had replaced this toilet maybe 2 years earlier after a leak damaged the walls and ceiling. 

@Greg M. Both answers are very helpful Greg, I appreciate your response.  Leaks are a pain in the neck, it can cost thousands in some cases.  

@Suly B.

Biggest expense has been HVAC.. Seems every purchase I make I need to update HVAC soon after and if I don’t it breaks in the hottest day of the year!!

In Order:

Mortgage

Taxes

Insurance

Maintenance

Utilities (water, HW, laundry and public area lighting)

Mortgage Interest followed by real estate taxes

well obvious ones are mortgage interest and tax.s 

but for me who is full time in the business not just a landlord

Its staff salaries..  followed by travel and lodging followed by entertainment  IE taking my vendors to dinners etc.

@Raul R.  Good point! Tenants will immediately notice when the HVAC system is not working properly.  Therefore, a well-maintained HVAC system is of utmost importance.  Thank you for your response. 

The purchase and rehab or stabilization, obviously.

Then W/S/G on the multi-families, appliances (especially w/d provided places) and hot water tanks. 

Funny how they come in waves.  1 year will be washing machines, another h/w tanks,  another furnaces or a/c units. Then 3 roofs...

@Suly B. Definitely landscaping such as mowing yards and raking leaves being in the mobile home investing business. Roof, plumbing and flooring issues are also a constant depending on the age, wear and tear. Hope that helps! 

@Jay Hinrichs , @Johann Jells  , @Jill F. Operating expenses, taxes, mortgage payments, insurance: Yes indeed thank you for your answers! 

Do most real estate investors consider the taxes that will be owed from the passive income? Or do they only consider property taxes, state/local taxes etc?

Originally posted by @Suly B. :

@Jay Hinrichs , @Johann Jells  , @Jill F. Operating expenses, taxes, mortgage payments, insurance: Yes indeed thank you for your answers! 

Do most real estate investors consider the taxes that will be owed from the passive income? Or do they only consider property taxes, state/local taxes etc?

I don't include income tax. as it not static one year I might pay 500k in income tax the next year only 300k..  were as property tax is static for the most part or only moves maybe 1k at most.. but I am not a landlord I built and develop..  

Originally posted by @Suly B. :

@Jay Hinrichs , @Johann Jells , @Jill F. Operating expenses, taxes, mortgage payments, insurance: Yes indeed thank you for your answers! 

Do most real estate investors consider the taxes that will be owed from the passive income? Or do they only consider property taxes, state/local taxes etc?

 I assumed we're talking about whats on your form E or corporate return for your real estate business, not your 1040. Income tax is not a business expense.  Once it transfers to the 1040 income tax is the same no matter what the source. 

@Johann Jells I was referring to property taxes, which here in Ohio are assessed by the county semiannually.

@Suly B.

Funny how different the answers are. I would guess that it depends on what level you are at. 

For me its the 25% down payments and rehab costs.  I like to put a nice product in service so I spend alot of money on rehab so after putting a place in service,, future repair costs are few and far between.

Originally posted by @Jill F. :

@Johann Jells I was referring to property taxes, which here in Ohio are assessed by the county semiannually.

 Jill, you said "Do most real estate investors consider the taxes that will be owed from the passive income?". That seemed to be talking about income tax not property tax. Property tax is just part of the overhead like mortgage and utilities.

@Suly B.

Funny how different the answers are. I would guess that it depends on what level you are at. 

For me its the 25% down payments and rehab costs.  I like to put a nice product in service so I spend alot of money on rehab so after putting a place in service,, future repair costs are few and far between.

Originally posted by @Suly B. :

@Jay Hinrichs , @Johann Jells  , @Jill F. Operating expenses, taxes, mortgage payments, insurance: Yes indeed thank you for your answers! 

Do most real estate investors consider the taxes that will be owed from the passive income? Or do they only consider property taxes, state/local taxes etc?

Hi Johann, The questions you attributed to me were actually posed by Suly Bolanos in a post were I was mentioned. My initial answer was mortgage interest and real estate taxes. I later clarified my use of 'real estate taxes' in response to your question as property taxes that are assessed by the county. The quotation notations here are sometimes confusing.

vacancy/tenant turnover.  Vacancy typically always costs me at least 1 month of rent on average, and the tenant turnover can be costly if it involves interior cosmetic repairs to get the unit ready for the next tenant.  Tenant turnover also occasionally involves an eviction which can be expensive assuming I will rarely get the money I am awarded in court.

It hasn't cost me much yet but CapEx will hit hard when it's time to start replacing HVAC, Siding, Roofing, Parking Lots, Etc.

@Damaso Bautista Oh yeah, a lot of good answers were mentioned, thank you for yours.  Spending money upfront for improvement helps increase the value of your property long-term. 

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@Raul R.

Feeling this exact thing right now. Bought a place, placed a tenant, and a week later the 1-3 year old furnace goes! What luck!

With two gut rehabs going on that the moment, holding cost, labor, and construction materials are like a black whole you throw checks into. 

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