Positive cash flow means that you rake in more money each month than you shell out. You get to pocket the surplus. How much money you rake in is fairly simple: it’s the amount you are able to charge in rent. But how much money will you have to shell out? That’s a little more complicated. Here are the 7 expenses you should be prepared to pay on your Murfreesboro rental property:
The real money in rental properties comes after you’ve paid your mortgage off. Until then, the bulk of your expenses will be your monthly mortgage payment.
To keep your mortgage payment as low as possible, make sure you make a 20% down payment or larger. Otherwise, you will have private mortgage insurance tacked onto your monthly mortgage payment, an extra expense of $100 or more! Also, negotiate hard for the lowest interest rate possible.
Contact an insurance agent to get an estimate of the cost of coverage for your property. Depending on the location, you might also need earthquake, flood, or HO-6 interior condominium unit policies.
Taxes are variable depending on your middle Tennesse location, and you can’t assume that the tax rate the previous property owner paid will be the same tax rate you pay. To get a solid estimate, contact a county assessor.
Homeowners associations can increase the value of a property by ensuring that all the surrounding properties are prim and pruned, but they can also impose heavy fees. Do a little digging to find out about any homeowners associations and their fees before you put down roots.
If you are willing to invest money into a rental property but hold your time at a higher premium, you can outsource management responsibilities to a property manager. Expect to pay 6-8% of your monthly rental income to the property manager.
No one wants to live in a beat-up home, and you don’t want to own one either. The costs of landscaping and pest control will definitely rest on you. Some landowners also include utilities (gas, water, electricity, wifi, or some combination thereof) in rent. However, tenants are generally less likely to be conservative with their utility use if they’re not footing the bill.
Aside from general maintenance, you should be prepared to swoop in when things go wrong at your property—and they will go wrong! From clogged toilets to leaky roofs, the upkeep of the property is on you.
Now that you’ve got a checklist of expenses, go out there and get some price estimates from professionals. For items you can’t get quoted, talk to owners of similar properties in the neighborhood. They can give you a good idea of their utility bills and might be able to refer you to a dependable pest control service or maintenance man. The more you know, the better investments you will make.