When it comes to single-family rentals, surprises are rarely a good thing. This is particularly true when those surprises are unexpected costs or expenses. There might be a few unwelcome surprises for the new real estate investor in Manhattan. With proper foresight of the most common hidden expenses, however, rental property investors can be prepared to face these unexpected events.
Every single-family rental owner needs a good quality landlord liability insurance policy. But that doesn’t mean that the policy must be the most expensive one you can find. Insurance policy rates can vary widely, as can the quality and reputation of the company offering it. This makes it important to shop around before choosing your landlord insurance policy and to check your rate annually for changes. If you aren’t carefully comparing rates and insurance carriers, you may end up paying far more than you need to for your landlord insurance.
Secondly, a property’s utility bills may also come as a shock. An energy-efficient property is one that has relatively low energy costs. However, new investors might find that a new investment property is accompanied by a high energy price tag. Although the reasons for this vary, multiple options can be explored by the property owners as to the way they can make their rental property more energy efficient. To get a better idea of where the issues may lie, you can check the house for air leaks, aging appliances, and other energy “vampires”. Replacing weather-stripping, single-pane windows, lightbulbs, and other leaky spots can go a long way toward lower energy costs. With a few simple fixes and some annual maintenance, you can significantly reduce your rental home’s energy bills.
Erosion Prevention and Repair
Throughout the first year of rental property ownership, owners will realize how each new season can bring surprises of its own. Warm spring weather sometimes reveals erosion issues that were not visible during colder months. In such cases, the cost of erosion prevention and repair may come as an unwelcome surprise. As soil is eroded from a home’s foundation, water can pool and result in damage. Guaranteeing that your house has proper drainage and has been thoroughly checked for signs of soil erosion helps in avoiding any unknown prevention and repair costs.
Even the best single-family property owners may face unexpected legal fees at certain moments. Working with tenants is rarely easy, and disagreements can and do happen. It is wise to budget for a future lawsuit. Still, it’s wiser to take the necessary steps to prevent a lawsuit in the first place. Performing regular maintenance on the property and responding promptly to repair requests — this is one practice that leads to the prevention of potential legal problems. Ensuring your property is compliant with safety standards, offering basic safety equipment, and checking for hidden problems like mold, lead paint, or asbestos — these are simple but effective steps towards enjoying a life free from the courtroom. Following your lease agreement, and encouraging your tenant to do the same, is a commendable technique to avoid tenant lawsuits and keep legal fees at bay.
Inadvertent Appliance Damage
Finally, an unexpected cost that the rental property owner might face is how quickly appliances seem to wear out. The cost of replacing major appliances every few years can have any investor feeling sticker shock. The trouble isn’t necessarily the abuse of the appliances by the tenants, but the damage accidentally caused to them by the tenants’ failure to safely run them. A good way to keep your rental home’s appliances running longer and better is to educate your tenants on proper appliance use and care. Notify your tenants that correct usage of appliances and the implementation of a few basic maintenance tasks will significantly extend the life of the appliances.
Now that you know several unanticipated expenses that come with owning single-family rental properties, you can be better prepared to reduce or avoid them. By being proactive with tenant education, property maintenance, and cost comparisons, you can better prevent a number of unwanted expenses that come with real estate investing.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.