Investing in a rental property can be a fantastic way to build wealth, but it’s essential to know what you’re getting into financially. While mortgage payments and the occasional repairs are obvious costs, several other expenses often go overlooked. To help you plan for the long term, here’s a breakdown of the true costs of owning and managing a rental property in Southeastern North Carolina.
Property Taxes and Insurance
Beyond the mortgage, property taxes are one of the biggest expenses property owners face. Rates vary by location, so it’s important to understand how much you’ll owe each year in your area. In addition to taxes, landlords need to maintain solid insurance coverage. Standard homeowner’s insurance usually isn’t enough— insurance is typically required to cover rental-specific liabilities and potential income loss if the property becomes uninhabitable.
Maintenance and Repairs
Regular maintenance and repairs are necessary to keep tenants happy and avoid costly issues down the line. From seasonal upkeep, like HVAC servicing, to urgent repairs, such as plumbing or electrical problems, maintenance costs can add up quickly. While it’s hard to predict exactly what you’ll need to spend, setting aside a portion of rental income (typically 1-2% of the property value annually) can help cover these expenses.
Watch our free webinar to learn more about essential preventative maintenance tips for residential rental properties!
Property Management Fees
Managing a rental property can be time-consuming and requires expertise to handle tenant relations, rent collection, and property maintenance smoothly. This is where partnering with a professional property management company like SPM Residential Services makes all the difference. While property management fees are an added cost, the peace of mind and time saved often more than offset the expense. Plus, property management fees are typically tax deductible.
Professional property management services can help enhance tenant satisfaction, minimize vacancies, and even improve your property’s long-term value.
Utilities and Landscaping
Even if your lease specifies that tenants cover utilities, property owners may still have some expenses, especially during vacancies. Landscaping is another cost to consider, as it can improve curb appeal and maintain the property’s value. While landscaping may be seasonal, maintaining clean and appealing outdoor spaces is essential in attracting new tenants.
Vacancy Costs
No property stays rented 100% of the time, and vacancies come with their own costs. Not only do you lose rental income, but you’ll also need to cover utilities, basic upkeep, and sometimes extra advertising fees to attract new tenants. It’s wise to budget for at least one to two months of vacancy each year as a buffer for these potential gaps.
Owning a rental property offers great rewards, but being prepared for the full range of expenses is key to sustaining a successful investment. By accounting for property taxes, management fees, maintenance, and potential vacancies, you’ll be better equipped to maximize your rental property’s potential.
If you’re interested in expert help managing your rental property, contact us today to learn how we can make ownership easier for you!