We previously shared three costs of buying an investment property, and we’re back today with some more. Here are four more costs you’ll need to keep in mind when you invest in real estate:
1. Utility costs. Oftentimes, you can have your tenants pay the utilities—especially if they have separate meters. In jurisdictions like Philadelphia, however, if the tenant doesn’t pay their gas/water bills, the costs can become lienable against the property. There are a few ways to get around this, such as going through a waiver process for gas bills, creating a reimbursement-type arrangement in your lease, and more.
2. Property taxes. If the taxes aren’t in line with the neighborhood’s values, you can always appeal them. You can find the numbers in public records—if you can’t access them yourself, I can certainly help you.
3. Property insurance. This actually isn’t as expensive as you might expect; it’s not like what you’re paying for your primary residence. I recommend covering the home replacement value, which is about 0.5% of the property’s value.
4. Other costs. This is made up of expenses that are unique to a particular property, such as homeowners association fees, snow removal, lawn care, etc.
The four items from this video and the three from the previous one will help you analyze the rate of return you’ll receive for a property. By looking at your income and these expenses, you’ll find your net operating income (NOI) and be on the path to finding out what your property is truly worth. We’ll talk more about using these metrics in future videos.
If you have any questions, need more information, or have any ideas for topics I should cover, feel free to reach out to me. I look forward to hearing from you soon.