David Schwartz
Renting your property to earn extra income is an amazing investment. However, this business involves loads of financial, legal, and logistical challenges. If you don’t prepare appropriately, it won’t be easy.
There are several hidden costs for renting a house, including maintenance, utilities, insurance, and more.
So, before starting this journey, learn what costs are involved in renting a house from this blog!
1. Initial Setup Costs
Before putting your house on the rental market, you must ensure it’s in top condition. This will make your property more attractive to tenants and meet local housing standards and regulations.
For starters, here is the hidden cost of renting a house in this scenario:
Renovations, Repair
The most common landlord expense is fixing leaks from all faucets and the toilet. If there’s already any major damage, you’ll have to invest in replacements.
However, toilet leaks can be challenging to identify. They add up to an awfully huge amount over time, including replacements and water bills.
So, consider investing in some smart fixtures like motion sensor leak prevention devices for toilets. This lets water flow into your toilet tank only when it senses activity within the bathroom.
When the user leaves the toilet, the valve cuts the water flow. If there’s any leak, you won’t lose water continuously!
Another way water bills increase the cost of rental property is through high-flow showerheads. Even if you add low-flow fixtures, tenants are prone to tamper and take them off.
So, invest in a tamper-proof shower flow controller. You can install it on the shower fixture behind the wall. This optimizes the flow of water and the amount of water used in every shower.
The Shower Scrooge™
You must also upgrade the kitchen space and appliances and repaint or apply new wallpaper throughout the house. Replace burnt-out and old light fixtures as well.
Cleaning
Another of the obvious expenses for landlords is making the property attractive. This includes deep cleaning it by professionals.
This might seem like a one-time endeavor, but you must do it frequently to keep the space presentable. After all, you never know when tenants might want to visit.
The property needs deep cleaning, especially if it’s been vacant for a long time and after being vacated by previous tenants.
Inspections, Certifications
You also need to spend on inspections to get certified. These include safety, electrical, and energy efficiency inspections. However, these may vary based on location. If your property is old or has never been rented, the certification might be costlier.
Marketing Costs
Once your property is ready, you also need to invest generously in marketing on reliable rental sites, real estate sites, and newspapers. You’ll also have to take professional photos of the space to attract quality tenants.
2. Utilities
Another cost of renting a house includes utilities. Utilities, including water, electricity, and heating, are usually the landlords’ responsibility.
You pay them directly while including a certain fixed amount in the rent. Make sure you budget properly so that you don’t land with unexpectedly high utility bills.
Moreover, water from the municipality also includes air, which is tracked in the meter. So, you pay for air and water.
To save water bills, consider installing a smart valve that eliminates the air from the water flow! Thus, your meter will only show readings for the exact water volume and nothing else!
On the other hand, tenants are responsible for additional utilities, including cable and internet.
In some areas, landlords pay for them. In others, it’s the tenant’s responsibility. So, you must check out the trends and standards in your locality.
3. Ongoing Maintenance
Besides the repairs and renovations before getting tenants, you also need to invest in ongoing maintenance afterward. Some of these hidden costs of owning a rental property include:
Regular Maintenance
Basic regular maintenance is a must to ensure your property is as good as new. This includes maintenance of the landscape, HVAC systems, plumbing health check, pest control, and gutter cleanup.
If you avoid them, it can damage your property and lead to serious expenses later on.
Wear and Tear Repair
Once you get tenants, daily use will lead to a certain amount of wear and tear. These may include replacing worn-out carpets, repainting the walls, or upgrading/fixing appliances.
Emergency Repairs
You must also account for emergency repairs, including broken plumbing, HVAC, and water heating systems. Tenants expect you to deal with these immediately, so have enough funds for them.
4. Insurance
If you’re wondering, "How much does it cost to be a landlord?" a significant investment is in insurance.
Landlord Insurance
You can’t use homeowners’ insurance for rental properties because it doesn’t cover the plausible damage, income loss, liability, and other risks,
Moreover, landlord insurance premiums are much higher. It increases if the property is located in a high-risk zone. On average, landlords’ insurance is around $126 per month in the US.
Liability
You can also consider additional liability coverage among rental property costs. If a tenant/visitor gets injured on your property, you are protected from such claims using liability coverage. While it might seem silly, such coverage exists to protect you financially and legally.
5. Legal Costs
Legal factors also comprise the cost of renting a house.
Legal Compliance
You must also comply with local law, including tenant rights, safety, and habitability. These include installing smoke and carbon monoxide detectors, keeping fire extinguishers, and building fire exists.
Lease Preparation
You’ll also have to invest in drafting a lease agreement with the help of a legal advisor. This is specifically important for areas with complicated rental laws. This expense is only one time for every lease.
Eviction and Collection
Property renting also includes some worst-case scenarios, including evictions. While you don’t evict tenants every day, you have no option if they don’t pay rent or violate lease terms. So, you’ll incur legal and court charges with rent loss.
They might also trash the property while leaving, leading to expensive repairs. To recover money for lost rent and damages, you’ll have to invest in additional legal help and collection agencies.
6. Taxes
Property tax is another additional hidden cost of renting a house. In localities with rapidly increasing property values, the taxes are huge.
Once you put your property on the market, you’ll have to pay these taxes whether you get a tenant or not. So, you’ll need enough funds to keep up with the cost of renting a house.
An increase in property taxes often reduces profitability significantly. This is especially true for landlords with multiple properties.
In certain cases, landlords can, however, minimize the burden of property costs by raising rent. However, you can increase rent only according to local regulations and market demands.
Conclusion
Ultimately, the answer to “What do you pay for when renting a house?” depends on the above-mentioned six expenses. These can impact your rental property’s profitability significantly. So, consider each of them carefully, seek professional guidance, and make wise financial decisions.
You can also minimize such expenses by investing in smart water-saving technologies. For more support, check out our range of products at TheWaterScrooge and make the most out of your property!