When Sam and Holly’s parents retired, they had prepared for this moment many years ago by buying real estate that provided an income. They found every rental property they owned needed treatment as an individual business. Like any business, they kept track of everything that impacted their bottom line. In many cases, they found six hidden fees can ruin real estate income. It is the little fees that eat away your income if you are not careful. Alone these hidden fees will not break the bank, or in some cases even be noticed, but this doesn’t mean they don’t have an impact.
Little Fees that Eat Away Your Income
- Some things need repair at some point in every lease. Even if your property is updated there are always minor items every few months. Over the course of the year, you can easily rack up $500 or more in incidental maintenance. You also need to consider seasonal maintenance items on the HVAC, furnace & oil tank. This doesn’t include fall leaf removal or spring cleanups. Minor maintenance alone will not break the bank, but if you add everything up, you could easily approach one monthly payment.
- Governments like to charge fees. They can vary from special arts tax, leaf disposal and annual application fee. This annual fee is in addition to any property inspection that is required.
- Gas/Travel Expenses. You can be the property manager or hire it out. If you do it yourself, you will need to track travel expenses to and from your property. Also, consider wear and tear on your car. Those expenses can add up. A property manager will handle all the issues but will take roughly 10% of the total monthly rent received.
More of the Little Fees that Eat Away Your Income
- Running a rental property is time-consuming. If you opt to manage the property on your own, you need to embrace the fact that you are going to spend more time than you think at the property. You can plan on averaging at least a few hours a week for the property as well as a few hours on the weekend. Time is a precious commodity that you must consider.
- There are still some basic items that are needed. You should plan on having a few shovels, brooms, rakes and a garbage can for the kitchen. If you are self-managing, you are going to need a lawnmower for the grass and maybe a snow blower for the driveway. It is also a good idea to have a basic set of tools as well as a power screwdriver for the unexpected interior fix. Your set of tools doesn’t need to be great, but they should be reliable to use in a pinch.
- Vacancy/Eviction.Let’s face it vacancies happen, and it usually catches you completely off guard. You may have a great tenant who loses their job or gets sick and everything changes on a dime. A vacancy hurts in two ways. The most obvious is the immediate loss of rental income. The second is the need to find a new tenant. Without ample reserves to cover the mortgage payment you can hurt your credit that can impact other areas of your business. A vacancy/eviction is one of the worst things that can happen to any landlord but must be anticipated.