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

104 Replies

upstate new york taxes are crazy.   8000 a year on my 135000 dollar property.

upstate ny refuses to be reasonable with taxes

For me it's the things that actually come out of pocket. The PITI is paid by tenants so I'm going with vacnacies.

WOOF! lol I meant ROOF!

Deprecation 

Good question. I had to go into my QB to be sure. 

FYI: Commercial Asset...in order they are...

Payroll

Interest

Utilities (Mainly electric)

Property Tax

Insurance

Bonus Round: These aren't expenses but Sales and Occupancy tax would be top 5 if included.  

To those saying time & opportunity cost, that's true as an investor's expense.

If we're talking property expenses, the biggest are vacancy, management / staffing, and maintenance. These 3 expenses eat up about 25% of the total income.

Originally posted by @Kevin Marcucio :

upstate ny refuses to be reasonable with taxes

 It is because of emperor Cuomo's precious NYC- Ya know, the only place in NY he cares about so he can stay in office. I totally agree with the taxes as a MAJOR expense here in upstate. Our cities failing water and sewer infrastructure really puts a dent on profits too. Our cities are getting interest free loans and putting massive costs on the property owners to pay for this. It is insane. 

Like others said, time/opportunity cost - I should have been doing this 10-12 years ago instead of just the last 6.  

Followed closely by rehabs, taxes, etc.

@Suly B. for me it has been

1. Mortgage

2. Insurance

3. Taxes

4. Last year I had really high repair costs as everything decide to break, leak, and etc.

@Raul R.

What measures are in place for preventative maintenance, hvac can certainly get costly and quick but I would love to see what measures your taking ahead of time- I manage multifamily sites and have found some create ways to minimize cost (within reason).

Originally posted by @Max T. :
Originally posted by @Maurice Smith:

if you have a good home warranty, majority of expenses should be covered..  minus cap exp?

water heater or hvac for example,   goes bad I pay $100 to get it fixed and if it needs to be replaced its still $100 

 Add up all of your premiums over the course of the years. It would have been cheaper to replace that water heater out of pocket. This is how warranty companies make money. They are doing the budgeting for you.

My premium is $970 a year..seems like a fair deal if something was to happen to one of the higher expensed appliances. Not sure if your  familiar  With Nevada but having a warranty on the hvac is almost mandatory especially in mfh 

Originally posted by @Kinjal Patel :

@Maurice Smith

Which warranty company you use?

Message me for That info if interested. 

Biggest expense?  

TIME!  

Should have started investing when I was 5 years old... 

@Dave Van Horn

Just finished reading your book the other week. Only took me 3 days to read because I couldn’t put it down. A lot of valuable information so thank you very much. After reading your book I definitely can see why you answered this thread the way you did. Thanks for sharing your knowledge!

BAD TENANTS. All day long, they've cost me more than anything. In some cases I could lay some blame on cost back to the property managers, which can cost an investor a fortune, but let's go with bad tenants for the sake of the conversation.

I would say opportunity costs between different syndications first, then the cash to raise or earn to meet the current minimums!

Finally I would say the GP cut & taxes as they both add up.

When I owned single family & now here in Texas it would be property taxes, real estate commissions & closing costs in that order!

Originally posted by @Will Wu :

Roof replacement. From $20K to $40K per roof. Just did 3 of them in the past 3 months and there it goes all my profits for the year...

@Will Wu   That a lot for roofing. Are that for single family or what size multifamily units?

Mortgage interest until the mortgage is paid.  Then Depreciation - but that's sort of not an expense.  Depreciation is almost tied with property taxes most of the time for me.  So Property Taxes would be next.  

After that it would be CapEx in the year's when there is some. New roofing has been my single biggest CapEx. I've always done tear offs and never done a 2nd layer of shingles over existing shingles but I might do that some day in a jurisdiction where it's allowed.

If there is no capex next would be insurance.

Next would be prepwork for the next tenant when one moves.

If there is no capex and no one moves in a particular year next might be mileage for me because mine have been scattered and I enjoy visiting them to fix small things that don't require a licensed plumber or electrician and sometimes I even like to visit when those trades are there.

After that on my Schedule Es it's probably lawn care related expenses.

Originally posted by @Joe Moore :

@Will Wu  That a lot for roofing. Are that for single family or what size multifamily units?

 6800 sq ft multi family fourplex. $40k shingle roof replacement 

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