Renting out a property may appeal to homeowners unable to sell their homes or to investors looking to increase their portfolios. There are, however, several costs associated with rental properties that novice landlords often overlook.
Landlords have to deal with a lot of different matters. This includes dealing with unexpected start-up costs of your rental properties in New Orleans. Getting ready for these unforeseen costs makes it easier for you to plan with the moving timeline and to budget for the investment expenses.
Before starting your rental property business, be wary of these five unexpected start-up costs recommended by experts for new landlords.
5 Unexpected Start-up Costs of Rental Properties in New Orleans
1. Taxes and Fees
Taxes on a rental property are paid by the owner. Compared to people who live in their own homes, these taxes are generally much higher. The homestead exemption is not available to you, and this tax increase is something you might not have considered before.
The fact that you are renting the space may still qualify you for certain tax breaks. A professional accountant can help you avoid getting into a tax trap.
2. Increased Insurance Costs
An additional expense that comes with owning a rental property is the insurance cost. Rental property owners will need to apply for specific insurance coverage. Landlords, however, may have to pay as much as 25% more for this type of policy. You may want to factor this in when setting your rental rates.
3. Cleaning Cost
Despite it seeming like a small cost, there is much more to it than you might initially think. Tenants will want to see a property that is exceptionally clean when they come to view it. Achieving this level of cleanliness on your own may be challenging. It is likely that you will need someone to assist you in deep cleaning the premises.
Despite this being a minor expense, it can accumulate if you own more than one rental property or if your rental property has a high turnover rate. Be sure to include cleaning fees as part of your initial budget.
4. Legal Fees and Administrative Charges
You may not have considered hiring an attorney, but you’re probably wrong. Owners of rental properties often overlook this factor. Having legal advice is essential when determining the terms of a rental contract. The cost of good attorneys can be extremely high, but they will save you thousands in the long run.
5. Tenant Screening
You’ll want to be careful about who you rent your property to if you plan on renting it out. Conducting background checks on the applicants and looking into their credit histories are some of the things you can do. This will, however, cost some extra fees, which you should include in your budget.
Even with your best efforts, there is the possibility that you may have bad tenants. You may also have to incur unexpected expenses because of this.
While rental properties may have more hidden costs, they can produce a high rental income if they are well managed. Making wise decisions when investing in a rental property is possible if you fully understand the hidden costs involved.
Interested in investing in rental properties? Engaging the services of an experienced and dedicated property management company can help you make the most of your property investment.