With so many foreclosed properties available on the market, owning real estate is becoming a hot commodity. The truth, however, is that most real estate investors may lose their property sooner than they would think. What most investors don’t realize is the amount of money that goes into a rental property’s operating expenses.

Unfortunately, it’s hard to give a definite number on how much you can expect to pay in rental property expenses. However, depending on the age of the property, you can get a general idea of how much you may have to spend.

For instance, if you acquire an older property that has a lot of deferred maintenance, the probability is you’re going to spend more money compared to a newer well-maintained property. Regardless, though, of what kind of property you have, it’s pretty much guaranteed you will encounter some unexpected expenses.

Before we continue, it’s important for you as the investor to know what an operating expense is. An operating expense is generally all expenses necessary to run and maintain a rental property. This includes property taxes, property management, maintenance and repair, landlord insurance, advertising, vacancy expenses, landscaping service, etc. These are basically all fixed expenses you can budget for.

Now that you understand what an operating expense is, what about the unexpected? For instance, what if the water heater goes out after ten years? Are you prepared to pay the almost $800 for a replacement?

In our 20 years’ experience at Stokley Properties, this stuff happens and it will happen to you. Therefore, it’s good to have a reserve account set aside in case an unfortunate situation arises. This way there will be no drain on your checking account.

Being a landlord is a tough business and most don’t realize the inherent cost of owning property. People tend to underestimate the cost that goes into running a rental unit, and sometimes overlook tenant issues.

For instance, what if your tenant decides not to pay rent anymore? Now, there is no cash flow from the property and instead, you’re paying for the rent lost along with the eviction process.

Or perhaps, what if the tenant causes major damage to the home? There’s a lot involved and you don’t want to go into the landlord business unaware of these possible circumstances.

Being a landlord and owning rental properties is no easy feat and the expenses involved can be overwhelming if you’re not prepared. Luckily with the help of a property manager, they can help mitigate these issues for you and find the best vendor possible for your problems.

If you have any question, feel free to contact us.