Property Investor Advice: Don’t Get Caught Short

Are you on the hunt for a solid investment property? Rochester could be your answer. With the rental market booming, there’s never been a better time to invest in the buy-to-let market and earn an extra income. However, if you want to turn a profit along the way (whether you’re a seasoned investor or you’re dipping your toes into real estate for the first time) you need to know what the hidden costs of being a real estate investor are and how to avoid them. The most important part? It all comes down to the ‘location, location, location’ of your investment property. Rochester, NY, is often voted one of the best cities in the USA for quality of life because of its affordability, high employment rates, and excellent selection of properties with consistent growth capital. In fact, Rochester was rated as the ninth most liveable city in America by U.S. News & World Report.

But, have you considered everything you need to be prepared for as an investor? In this post, we get into the hidden costs of a landlord so you’re not caught short when those unexpected expenses seemingly come out of nowhere!

Emergency Maintenance

A rental property needs regular maintenance to ensure it’s in good repair and everything is in working order. Maintenance costs money, not to mention unexpected emergencies, such as a leaky pipe, electrical fault, or structural issues that must be repaired immediately before the damage gets worse and you potentially face litigation for an injury that occurred due to your negligence. If you’re not handy yourself, you’ll have to hire someone else to make the repairs which will eat into your profits. Be sure to set aside money each month for repairs and retain a positive cash flow even if you have to make a payout.

There are a few legal requirements that landlords need to meet to ensure the property is safe for tenants. For example, you’ll need to complete an annual gas, fire, and electrical safety check. If your property is furnished, furniture and electrical appliances should adhere to safety standards. While the cleaning and upkeep of the house is generally the tenant’s duty, it’ll fall within your remit as the landlord to keep the property safe and in good condition. Other things you’ll be responsible for include maintaining HVAC, wiring, and any common areas if it’s a shared living space. You never know when these costs could arise, so it’s best to have some money set aside in case of an emergency.

Vacancy Costs

If your rental unit is unoccupied for some time, you’ll still have to pay its operating costs (think the mortgage, taxes, and utility bills), which cut into your revenue. Also, it may be a while before you find a responsible and reliable tenant to rent your place, so back-to-back leasing isn’t guaranteed. If you count on a rental income to cover things like repairs or other expenses required by law, you’ll have to make up the difference and fund this from another source. You could also have expenses related to posting ads for new tenants, as well as hiring a photographer or videographer to professionally document your space. In addition to your marketing efforts, running background and credit checks on prospective tenants is another cost you might incur.

Legal Expenses

If issues arise with a tenant and they need to be evicted, this can result in legal expenses. Not only might you need to pay for a lawyer for advice or representation but you may also need to file legal documents and appear in court—all of which comes at a cost. It pays to keep up to date with local landlord-tenant laws and regulations so that if things do head down the legal path there are no unwelcome surprises in store. Having some money set aside for legal purposes is good business practice as if something does go wrong, your insurance may not cover your expenses. It’s useful to build up a contingency fund so that if the worst-case scenario does occur and your tenant doesn’t pay their rent, then you’ll have enough money stashed away to cover your mortgage in the meantime.

Property Renovation

Regular maintenance like cleaning common areas in multi-unit buildings, landscaping, and making minor repairs are only inevitable. However, you’ll also have to make capital improvements to your property over time due to natural wear and tear. For example, renovations like painting, roofing, or replacing an old appliance are all par for the course and will help you maintain the value of the property while keeping tenants happy. To prepare for these expenses, earmark money in your budget throughout the year as these projects are bound to crop up during the course of a tenancy. Most tenants will take care of your property as if it were their own, but there might come a time when a tenant causes damage that exceeds their security deposit, meaning you’ll be left to foot the bill.

Final Thoughts

To get the highest return on your investments, it’s important that you pick the right area for your investment property. Rochester is an ideal location for first-time investors because of its affordability and range of employment opportunities. There’s also a low cost of living, indicating that it’s a low-risk high-reward area as far as capital appreciation is concerned. If you’re looking to purchase an investment property and use the rental income to supplement your salary, be warned—although owning real estate can earn you a passive income, being a landlord isn’t as simple as putting your feet up and watching the rent roll in!

So, what’s the best way to avoid unexpected expenses from adversely affecting your bottom line? The simple solution is to hire a knowledgeable property manager who can guide you through budgeting, helping you to determine your financial goals and allocate funds accordingly. Here at Torres Turn Key, we specialize in property management in the Rochester area. We’ll help you avoid unnecessary expenditures and set you on the path to long-term success.