Today, we are talking about the costs involved in owning a rental property. One thing to keep in mind is that it’s a business. Like any business, there will be costs associated with it. Those costs will vary based on the type of home you have, whether it’s a single family residence, a duplex or a multi-family building.
Property Taxes
Your largest expense outside of the mortgage will be property taxes. In Michigan, your taxes are higher on a rental property than they would be on the home you are living in. So if you have a rental home, or you’re thinking about converting your current home into a rental property, those taxes will be something to consider.
Insurance
Any time you own a property it needs to be well insured. The rates are not too different on a single family home than they would be for your own homeowner’s insurance policy. The rates will rise a little bit with duplexes and multi-family residences.
Utility Costs
Utility costs also need to be factored into your budget. In most cases, single family homes have their utilities paid by the tenant. However, you will be responsible for the utilities during periods of vacancy and you might pay for the heating or the water in multi-family properties. These can be expensive costs, depending on your property.
Repairs and Maintenance
Repair costs will vary by property. For single family homes, we recommend that landlords budget a month and a half worth of rent per year for repairs. The property might not require that much or maybe it will need more money for maintenance. The age and condition play a large role in maintenance costs.
Management Expenses
If you hire a professional property manager, there are expenses involved and those are tax deductible. When you decide to self-manage, you’ll still have your own time that you need to factor in when you’re calculating costs.
Vacancy
Vacancy is the biggest expense for rental property owners. It’s one of the best reasons to hire a professional property manager, because we can turn the property over quickly, keeping your vacancy costs to a minimum.
If you have any questions on how to budget for your rental property, please contact us at Real Property Management Southwest Michigan, and we would be happy to tell you more.
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