Costs First-Time Landlords Should be Aware Of | Pyramis Company

Costs First-Time Landlords Should be Aware Of

 

Owning your first rental property is full of unexpected surprises. Some of these surprises are pretty pleasant; the joy of providing homes to good people, the new relationships you forge with tenants and professionals alike, and the pride that comes with a well-managed investment. There are surprises that can be quite a bit less pleasant though; water pipes bursting unexpectedly, late rent checks, vandalism, and other unpleasantries. Taking the guesswork out of landlording is an important step to getting the most out of your investment; here are some costs you should be aware of, so they don’t come as a surprise.

Insurance

You absolutely need an insurance policy for your rental property; these policies serve dual advantages. Firstly, they protect your property from costs associated with damage and loss; each policy protects against different hazards, with different deductibles and maximums payable, so it’s important to shop around for the best possible plan. A good property insurance policy will also come with liability insurance, the second key component to protecting yourself financially. Liability policies will insure you if you’re sued for negligence or other personal damages. Insurance comes at a premium, though, so balancing a comprehensive policy with costs is important.

Paying the Government

Everything in your building will have to be kept up to code. Registration fees, rental licenses, and mandatory inspections will all factor into the cost of keeping a rental property. Code violations can cost a pretty penny and can be levied for anything from extensions too close to the property line to excessive litter, to badly maintained sidewalks. It’s not just the fines that are costly; making sure everything is well maintained to avoid them takes time, resources and knowledge. There are also property taxes, and the taxes on your rental income; you need to remember the rule of law when renting a property.

Vacancies

It’s easy not to think about vacancies when your rental property is filled with tenants; the good times are wonderful. When a vacancy occurs, however, it can be a double hit to your budget. You’ve lost the rental income from the tenant; if they paid utilities, now you have to pay those utilities instead, as water, gas, and electricity still need to flow. Additionally, there’s the expense of marketing for new tenants to fill the vacancy; all of this can add up.

Reputable property management companies can help you mitigate a lot of the costs associated with these three scenarios. They’ve been in the landlording business for years, so they know insurance brokers and neighborhoods, and can help you get the best bang for your buck out of your policy. They know the codes in the areas they work, so they’ll help you avoid the unpleasant surprise of code violations, and inform you of the maintenance you need to do to keep your building up to code. Property managers will also screen tenants for you, which reduces the risk of vacancy; when vacancies occur, they’ll also take care of finding new tenants for you. Many other costs, such as maintenance and yard work can be sourced through property management; their connections will help you save money.

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