What types of expenses should you anticipate when investing in rental real estate? How can you account for taxes and insurance for your investment properties? This episode was inspired by these listener questions, and I thought I’d take the opportunity to address this topic here on the show.
On today’s episode, I’m elaborating on the different types of expenses that occur in rental real estate, and how much you should set aside for each property. I’ll discuss my exact formula for calculating ROI, and how expenses factor into the formula. If you want to avoid extraneous fees and expenses, don’t miss this episode of Investing in Real Estate!
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In my ROI formula, I take out 40% initially. Those funds go toward a wide variety of expenses, including vacancy, repairs, and expenses. In the markets where I purchase my rental properties, I figure in a 5% vacancy rate. This gives my team a minimal amount of time, two to three weeks, to account for tenant turnover.
You should also be prepared to pay a management fee. Many new investors try to dodge the bullet and self-manage their properties, but paying for a dependable, on-site management team is worth every penny! You can expect to pay roughly 10% of your rental income on property management. Typically, the property manager subtracts their fee directly from the monthly rent.
Insurance is another factor to consider when investing in real estate. You’ll want to set aside around $500 per year for a single-family home. This covers liability, as well as the building, should anything unfortunate happen.
On today’s show, I’ll go in depth about additional expenses, including taxes and repairs. I’ll also discuss why you should assess all the expenses and fees for a property before you invest. If you’ve ever wondered what expenses to anticipate for a rental property, or how to factor them into your budget, this episode is for you!
If you’re ready to begin building a passive income through rental real estate, book a FREE call with my team today. We’re ready to talk about how you can earn legacy wealth for you and your family.
On this episode you’ll learn:
- How can you determine the taxes in different counties?
- What factors influence the insurance cost on rental properties?
- When should you set up a CAPEX account?
- Should you purchase a property in a homeowner association?
- And much more about real estate investing!