Question About Income Property Expenses?

Question

Hey BP,

I have a few questions about expenses on income property. I am interested in using a FHA on a duplex and wondering what expenses do I have to pay? Can I pass off the eletrical and water bill to the tenant and I just pay my share of the electricity, water, mortgage and property tax? Or do I have to pay for all expenses? Investors, if you don't mind, share what you do with your expenses when dealing in multi-family properties

Winston Spence · Answer

@Therese V. and @Elizabeth S. - Thanks for the advice, it is really helpful.

Elizabeth S. · Answer

It just depends on what the current set up is. I would recommend buying a unit that has all of the utilities already separated, it makes it a lot easier when you are just getting started. They pay theirs and you pay yours. You will have to pay the insurance and the taxes. You can get a quote from your insurance agent to give you ball part on that but it will be wrapped into your monthly payment as well as your taxes which you can look up in public records.

The other expense you will want to consider is shoveling and yard maintenance. Will you do this yourself, hire someone or give the tenant a break on the rent for doing it?

Don't buy a property that doesn't give you some cushion right away. For example if the mortgage is $1000 per month including taxes and insurance and you can only rent 1 side for $500, that means you have to come up with $500 every month and when they don't pay or when it's vacant you have to do the whole $1000. I'm using crazy numbers but you get the idea.

You will also be responsible for maintenance and repairs. Get a home inspection!! The roof, furnace, electric and foundation are all very expensive and key items to look at. Get to know a good handy man, because when repairs need done you will spend a lot of money calling someone in the phone book.

Sorry for the long explanation :)

Therese V. · Answer

If they are separate meters, I would have the tenant pay for their own utilities. If you pay for them, add in premium to rent to allow for this because electricity and water can really add up when someone isn't accounting for having to pay for it themselves.

Winston Spence · Answer

Yes, the property has separate meters for both units

Therese V. · Answer

Do you know if the property has separate meters for each unit?