Owning a rental property can be a great investment, but it is important to remember that there are a lot of costs involved. If you are considering owning one, you should look at your potential costs involved, such as a mortgage (use a mortgage payments calculator to figure out your costs), property taxes (check with your local tax assessor), and even utilities. It also depends on the type of rental you are considering – a duplex where you rent out half will be different than a property that is a 100% investment.
The mortgage is most likely your biggest expense if you own a rental property. However, a rental property mortgage is a little different than a regular home mortgage. Most 100% rental properties usually have a buy to let mortgage, which the bank relies on the potential income of the property, versus the home owner’s income, to see if they will lend.
Since the costs are a bit different, you may want to rely on a buy to let mortgage calculator to see a better cost comparison compared to a traditional mortgage.
Taxes and More
The next largest expense on any property will usually be taxes. You can usually refer to your local tax assessor to get the most recent tax statement on a property. You may want to be sure the property isn’t going to be reassessed soon, but past taxes are usually a good estimate.
Utilities are harder to estimate, which is why landlords usually make tenants pay the costs. However, there are some common fixed costs that you may pay – such as yard maintenance, trash service, or other services. However, since they are fixed, they are usually easy to budget.
Finally, you should always bank a little for maintenance each month, since repairs are inevitable.
Once you have an idea of costs, you need to balance it out with the income you will receive. And remember, it is a business, so you will be more successful if you treat it as such.