Rental property income is good (and necessary) for success, but it's not all cash in your pocket. When investing in real estate, Ellenton rental property owners must understand ongoing expenses that come with every property and balance rental income vs. ongoing costs to generate cash flow.
Like any home purchase, the initial purchase price and closing aren't the last of the money required to maintain a rental property's legal ownership and upkeep. However, with an investment property, owners should estimate some additional expenses that aren't necessary with private homeownership.
What kind of expenses should investors include in a rental property budget? How can property owners accurately estimate ongoing expenses? Check out these tips from our expert Ellenton property management team!
Use the Best Local Resources
You might have a buddy or family member who also invests in real estate. However, unless they also invest in Ellenton rental properties, they might not be the most accurate resource when learning more about expenses that apply to your investments in the area.
Having a network of like-minded investors and friends in the industry is an excellent way to gitem your knowledge and experience in real estate investing. When it comes to budgeting rental property costs, make sure that the network includes local professionals who understand the market and associated costs.
A well-rounded local network can include:
- Real estate agents
- Other real estate investors
- A professional Ellenton property management company
Keep in regular contact with these professionals when planning annual budgets and evaluating the rental price before starting a new lease term. They can help you stay up to date on current renovation and material costs and market-driven monthly rent prices.
Lay It All Out
Without understanding the typical (and some of the not-so-typical) expenses that come with being a rental property owner in Ellenton, it's challenging to set a rental rate that covers your costs and supports enough cash flow.
When considering expenses vs. income, it's time to get real and lay out every potential cost. Overlooking a critical item can leave your property without enough budget to handle critical maintenance tasks or create a deficit in your long-term income goals. A local property manager can help you identify every potential rental property expense and estimated costs.
Fixed Owner Expenses
Rental property owners should budget for fixed expenses, including:
If you work with an expert Ellenton property management company, include a line item for fees associated with their services.
Other Fixed Expenses
Do your renters pay for utilities? If not (and when your property is empty), be sure to budget for:
- Water and sewer
- Natural gas
When paying these costs (instead of your renters), be sure the monthly rent price covers these expenses in addition to the cost for your residents to live in the property.
Repairs, Maintenance, and Capital Expenditures
Every rental property needs a year-round maintenance plan. To keep properties in excellent condition, investors should schedule and budget for seasonal maintenance that helps rentals make it through changing seasons while keeping residents safe and comfortable. Skipping these routine tasks can lead to your properties lapsing into poor condition, expensive repair costs, and unhappy renters.
An Ellenton property management company can help you budget for estimated routine maintenance costs. They can also help you manage cash flow to cover unexpected repair costs. It's challenging to plan for some types of major rental property repairs. However, the right property manager can help you research current costs and average potential expenses every month to make sure you're prepared for any maintenance or repair need.
When it's time for significant upgrades (or capital expenditures), rely on your local network to plan timing, costs, and budget accordingly. Your property manager can also help you find potential tax deductions depending on the type of updates made to a property.
The Cost of Vacancy
While the right property manager can reduce vacancy times to keep your property occupied throughout most of the year, there will be times that your property sits empty. It happens, and it's part of the rental property lifecycle.
Be sure your budget includes estimated costs for:
- Your Makeready process
- Utilities (as long as the property stays empty)
- Marketing and screening for your new renter
Even with minimal resident turnover, investors must prepare for the expenses of vacant properties.
Budget Better With a Property Manager!
If all of this sounds like a lot of numbers, the best Ellenton property management company can help you make sense of it! Sometimes the 50% rule becomes the simplest way to plan expenses vs. income. This simple formula means that half of your rental income goes to estimated expenses (in addition to the monthly mortgage), so plan accordingly.
Ready to manage a better budget? Gulf Coast Property Management is your best local resource! Contact us to learn more about how we help investors estimate rental property expenses and income.