Any hidden cost when getting into rentals ?

Question

Are there any hidden fees or things to watch out for when dealing in rental properties. Mean like tips, trick, or fees they don't tell you about ?

Ned Carey · Answer

@Jason Chambliss management cost and turnover costs are the largest costs people don't think about when first buying rental properties.  There is noting wrong with managing your own properties.  But you need to consider how you will handle it when your empire grows. Those properties will have to be able to support management cost.

Jill F. · Answer

I had a guy OD in a unit-- that cleaning cost extra. I had a tree fall over on a tenant's car one week after I bought a property. Ask if there has been a recent bedbug infestation (treatments don't always work). Getting rid of bats is a PITA. Sometimes both cities and counties get you for rental registration fees. Lead abatement could be required if a kid under 6 moves in an unabated unit. The city required the former landlord on one of my properties to upgrade all the electrical boxes when they installed underground cable. If you have old galvanized supply water main you're living on borrowed time. Old clay drains are often collapsed. In some cities road work is paid for by property owners based on street frontage. I hate the gas company, it's $30 if it goes in your name even for just a couple of days.

Scott P. · Answer

In my State, landlords/property owners are responsible for sewer bills even if the bill is in teh tenants name.  I suppose that could be a surprise for a new landlord.

Off the top of my head the only other things I can think of are:

1. possible CapEx for new buried utility lines.  Most people don't think a water line or natural gas line will ever need to be replaced.

2. possible cost to remove trees since their roots can cause damage.  I didn't anticipate tree removal or stump grinding when I first saw that beautiful tree....

3. for a while my State had Personal Business Property Tax on non-built in appliances.  New landlords know about Property Taxes but not necessarily taxes on their refrigerators, stoves, etc.

4. You might discover that you have a pay a minimum utility bill, like for trash removal, between tenants even if the unit is empty and you're not putting out any trash cans.

Other expenses can be unplanned for surprises, like a water heater springing a leak but that's a "normal surprise."  The 4 listed above were things that blindsided me through the years.

Mike McCarthy · Answer

Capex is really the big one that is hard to handle. It’s hard to budget for a $10K roof replacement or $8K furnace in an older house.

Repairs are always unexpected, but hopefully manageable and not that expensive.

Theresa Harris · Answer

There are many of the normal fees associated with a house, many of those depend on where you live and what your tenants pay directly and what you pay for.  You will likely pay for garbage and taxes. Also HOA or condo fees if applicable. Tenants pay for utilities.

You also need to factor in vacancies and depending on the type of rental/tenant you may have more repairs.  If you want someone else to manage it, add in those fees as well.