If you’re a landlord, you know that managing an investment property can be rewarding and challenging. While you may be familiar with the obvious costs associated with being a landlord - like maintenance fees and tenant turnover- some less obvious expenses can quickly add up.
Whether your a first-time, season or long-distance landlord, it's vital to keep track of your expenses to protect your investment. In this article, we'll explore several costs that landlords don't always notice. By understanding these potential costs, you can be better equipped to plan and manage your property to maximize the return on your investment.
Maintenance costs are among the most common expenses that landlords accrue without realizing. Even when landlords try to budget for these costs beforehand, they can often be underestimated or overlooked completely.
When it comes to maintenance-related costs, there are a few key areas that landlords should pay attention to. Here’s a closer look at each of them:
This includes any routine checks and repairs that need to be done such as fixing leaky faucets or replacing broken appliances. While some repairs can be relatively inexpensive, others can quickly add up.
Landlords should also be prepared for unexpected issues such as a broken pipe or a leaking roof. These repairs can be costly and require immediate attention, so landlords should ensure they’re financially prepared in an emergency.
Even if there are no major issues, landlords should regularly inspect their properties and take care of minor maintenance tasks. This includes things like clearing out gutters or trimming shrubs.
It’s also essential to stay on top of any preventative maintenance to avoid having to pay for bigger repairs down the line.
Legal fees can quickly increase if landlords fail to stay on top of their paperwork and the law. Landlords may have to hire a lawyer to represent them in court or draw up tenancy agreements. These costs can be high, so landlords must be proactive about managing their rental properties.
By staying informed of relevant laws, landlords can save time and money and reduce their potential legal costs. Keeping all documentation up to date is also essential, as this may be used in the event of a dispute or court case. When handled correctly, landlords should be able to avoid costly legal fees altogether.
Depending on the type, size, and location of the property, a landlord may require legal services for:
Tenancy Agreement Preparation
A lease agreement is a legally binding document setting out the terms and conditions that both the landlord and tenant must follow during the tenancy. It should be reviewed regularly to ensure it's up-to-date and in line with relevant legislation.
Advice About Landlord-Tenant Laws
Every state has different laws governing the relationship between landlords and tenants. It's essential to stay on top of changes as these can directly impact how you manage your rental property.
Representation in Court
If a landlord ever needs to take their tenant to court, they'll require legal representation. This can be costly and time-consuming, so it pays to try and resolve disputes out of court wherever possible.
Handling Tenant Disputes
Landlords should seek legal advice if they ever face a dispute with their tenant over issues such as rent payments or damage to the property.
Poor Quality Residents
High turnover of tenants who pay monthly rent but don’t stay for long periods can become an unforeseen cost to landlords. What’s more, poor-quality tenants may cause damage to the property or create problems with neighbors and require additional legal fees. Additionally, landlords may have to deal with late or missed rent due to tenants who don’t pay on time.
One way to reduce costs associated with poor-quality tenants is to ensure that all rental applications are processed and screened properly. This includes conducting background checks and speaking with previous landlords or employers of applicants.
Doing so can help landlords identify red flags in an applicant’s history and provide an opportunity to screen them before signing a lease. Furthermore, landlords should consider the terms of their leases such as requiring rental insurance or implementing late rent fees.
Vendors and Contractor Payables
When hiring contractors or vendors for property repairs and maintenance, landlords may pay more than they initially budgeted. The cost of unpaid invoices can add up quickly, especially when the landlord has to hire a rent collection agency or take legal action.
Landlords must track all their bills and ensure that invoices are paid on time. This will help them avoid costly late fees and penalties and ensure that the contractors or vendors they’ve hired have received payment for their services. Additionally, it’s essential to research potential contractors or vendors before hiring them and to tailor the project's scope to fit their budget.
When rentals remain vacant for an extended period, landlords could be spending money on property marketing, repairs, and other costs without making any rental income. Vacancies may also lead to additional costs in the form of utilities if the landlord has agreed to cover them in the lease agreement.
These costs can become expensive if the property remains vacant for long enough. To avoid problems with lengthy vacancies, landlords should be proactive in their marketing efforts to ensure they reach as many potential tenants as possible.
Create an engaging property listing and advertise on multiple platforms including social and rental listing sites and consider traditional marketing strategies in form of “for rent” signs to get the word out about your property. Additionally, ensure that your rental listing is competitively priced and attractive to prospective tenants.
Owning rental property can be a significant investment, but paying attention to the small costs that can add up quickly is essential. Landlords can ensure they are getting the most out of their investments by reviewing expenses to avoid potential pitfalls.
If you’d like help managing your rental properties, contact the experts at Gifford Properties & Management today!