before I buy a property I want to make sure I run my expense calculations correct. this place has a monthly HOA and a zonal quarterly fee. Do I make the tenant pay for these as part of rent? (ie rent is $1500 and these extra fees, $200, would make rent a final $1700/mo).
No. I wish.
The more you itemize a bill, the more you open yourself up for debate ("why do I have to pay that cost?"). My landlord charges me one price for rent, the number specified in the lease agreement. In addition, an outside service breaks down the utility costs (water, sewer, trash) and allocates a number to each unit, which is added to the monthly rent. The utility cost varies each month depending on the overall usage by the apartment complex. I presume my landlord figured out rent numbers that in total cover its costs and allows for a profit. If not, the complex will end up in bankruptcy again as it was many years ago when a different owner mismanaged it and was forced out of business.
You need to factor those into your rent in terms of cost the same as your property taxes, but the tenants don't know (or need to know) what you use their rent to pay for. They just need to know that their rent is $X and if it includes electric, water, etc.
Fixed cost like HOA should be included as part of the rent. Variable costs like utilities you want the tenant to pay.
I generally factor the HOA cost into my expenses. I do not assume tenant will pay for it. But I do include it in to my asked rent. If some reasons the property sits for too long I adjust my rent accordingly.
No I do not make tenants pay the HOA fee - directly. But as noted above it certainly factors into the overall rent computation. No different than determining what your capex costs are when computing your cost structure on a deal
And what the rent needs to be to make the deal work. Rents need to be simple for tenants - ‘$xxx per month plus these utilities’.
@Josh Edelman I agree with everyone above - but for a different reason. An HOA debt can become a lien on your property. You DO NOT want a tenant to have that kind of responsibility. It is up to you to make sure your mortgage and HOA fees are taken care of monthly even if the tenant falls behind.
They pay it as a part of the rent. As with the others, all fixed costs are figured into the monthly rent. The cost for my taxes, insurance, PITI, etc are all business expenses that come out of the rent paid. Water usage is a monthly invoice added to the rent which is then sent to the tenant for inclusion in their next monthly rent payment.,
okay great thank you everyone!
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