You don’t have to be a real estate expert to know that investing in Roseville rental properties will deliver a lot of financial benefits. There’s the consistent rental income you’ll bring in, the long-term appreciation your property will earn, and of course the fact that your tenant is helping to pay down your mortgage and contribute to other expenses like insurance and maintenance. There are also some pretty great tax benefits that come with rental property investments.
However, there are some expenses too. You’ll have to budget for the costs that come with acquiring a property and then leasing it, managing, it, and maintaining it.
We’ve put together some of the most urgent rental property expenses you’ll have to prepare for when you invest in a Roseville, California rental home.
Budget for Investment Acquisition Costs
You’ll have to decide how you’re paying for your investment property. Unless you’re paying cash, there will likely be a mortgage, which means you’ll need to budget for one-time line items like closing costs, broker fees, and expenses such as inspection and appraisal fees. Don’t forget the ongoing costs like mortgage interest, property taxes, homeowners insurance, and any other recurring expenses like association fees.
Plan for Operating and Variable Expenses with Roseville Rental Properties
The fixed operating expenses will be easy to plan for. The variable costs that come with owning a rental property are a bit trickier to estimate. Here’s how they generally break down.
Your operating expenses will include things like:
- Turning on utilities
- Trash collection and sewer fees
- HOA fees and assessments, if applicable
- Landlord insurance
- Property management and other professional fees
- Property taxes
- Mortgage payments
These are costs you’ll know right out of the gate. You can safely work them into a monthly, quarterly, or annual budget.
Your variable expenses will include things like:
- Vacancy and turnover costs, which may be different from season to season or when the market shifts
- Leasing commissions or referral fees you may pay to agents
- Routine and preventative maintenance for normal wear and tear
- Landscaping and pest control depending on the season
- Major renovations and improvements such as a new roof or HVAC system
These are less consistent, but you still need to plan for them.
Budget for Marketing and Leasing Costs
Once you’ve closed on the deal and you are the proud owner of a new investment property, you’ll have to spend some additional money before you can start collecting rental income.
Making the property rent-ready may require an investment. Depending on its age and condition, you may have to do some repairs or updates before you list it for rent. A few upgrades, cosmetic fixes, and a complete cleaning will probably be necessary before you can start inviting tenants to see it.
There’s also the cost of marketing and advertising your home. Most advertising is done online, and some of the sites you’ll want to use will have a fee. You may want to hire a professional photographer to take great marketing photos, or you’ll need to pay a leasing fee to a Roseville property management company so you can be sure the home is rented quickly, for the most money, and to the best tenant.
Prepare for Rental Property Maintenance Costs
There are going to be routine and emergency maintenance issues at your investment property. Some of them will be minor; a $50 garbage disposal fix, and some of them will be major; a $5,000 roof replacement. Whether it’s for lawn maintenance, HVAC maintenance, or just preventative pest control, you’ll have to set aside a maintenance reserve to ensure you can cover the expenses that pop up.
Different investors have different ways of budgeting for these costs. You can put away 10 percent of your monthly rental income into a maintenance savings account, for example. Or, you can keep a credit card handy that’s only going to be used for repairs.
Roseville Property Management Fees
Smart investors understand the importance of surrounding themselves with experts. You probably didn’t broker your own mortgage and you likely didn’t perform your own appraisal. You need help from professional insurance agents, lawyers, mortgage professionals, and property managers.
All of these services are extremely valuable and they will ultimately help you earn more and spend less on your investment. However, they cost money, so be prepared for the fees. Roseville property managers charge a monthly fee, which is tax deductible. Make sure you factor these things in when you’re budgeting for your rental property.
When you need some support creating a budget and understanding the costs associated with your investment property, please contact us at Action Properties. We’d be happy to take a look at your unique property and your investment plans and help you establish a budget for your rental expenses.