Hidden Landlord Expenses Accurate Credit Bureau

Life as a landlord may be tempting to homeowners unable to sell their homes and others looking to add properties to their investment portfolio.

However, many costs associated with rental properties catch novice landlords by surprise. The following are four hidden expenses experts say new landlords should consider.

1. Increased insurance costs
Rental homes may cost more to insure.
For example, homeowners who cannot sell their homes should be aware that renting out the home changes the owner’s status from primary occupant to investor. As a result, it costs more money to insure the home with a special landlord insurance policy. According to the Insurance Information Institute, the premium is about 25 percent more than with typical homeowners insurance.
The tenant rent payment may help cover the increased expense, but landlords shouldn’t always count on it.

2. Legal fees and administrative charges

Landlords should budget money and time for getting legal advice. Some attorneys will charge a flat rate of about $200 for landlord services and other lawyers may charge by the hour.
Owners should also be prepared to pay for additional work if a tenant needs to be evicted, or there is some other legal dispute.

In addition to legal expenses, landlords will have to pay for administrative costs related to interviewing potential tenants, running their credit histories and checking references. Accurate Credit Bureau has several tenant screening packages available for landlords, real estate agents and property managers.
Property management companies typically charge about 10 percent of each month’s rent for their services.
Many municipalities require owners to register rental homes and make them available for examination.

If there is a defect, the landlord owner will have to pay to fix the problems.
Some municipalities also ask new landlords to attend day-long training classes that cover topics such as how to find good tenants, best practices in property management, and how to spot and report potential illegal activity.

3. Cleaning, care and maintenance costs
To attract tenants, landlords may have to spend up to $1,000 on paint, carpet and landscaping. Otherwise, it might be difficult to find a reliable tenant.
So, homeowners who can’t sell and decide instead to rent their home should plan to spruce up the place — just as they would before a sale.
When a tenant does move in, the landlord may be contractually obligated to fix new maintenance issues, such as a leaky toilet.
Once the tenant moves out, the landlord will need to spend more money to clean up the home for the next resident.
Landlords should be prepared to pay these expenses out of pocket.

4. Increased taxes
Many states and municipalities have tax rules that favor owners who live in their homes, such as the homestead exemption.
These tax breaks don’t apply to investment property. So, new landlords should be aware that they may have a higher tax burden on their investment property.
This issue is especially pertinent to homeowners who turn a primary home into a rental. An owner will probably have to give up the homestead exemption if he or she moves out of a property while continuing to own it. This would mean higher property taxes.

Of course, other expenses related to rental properties actually generate tax breaks for the landlord. For more Landlord tenant information see Accurate Credit Bureau.

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