26 Costs to consider before buying a Rental Investment Property

Buying a rental Investment property is not as easy as it is considered. Some people have the idea that if I buy any house and lease it out, it is bound to get returns. This is where people make the mistake of not analysing. We have seen tonnes of people making the mistake which can give those headaches later on. The basic idea is to calculate all the costs of buying and running a rental investment property and subtract it from the income. Connect with me to know more. To avoid making any mistake, here is the List of 26 Costs to consider before buying a Rental Investment Property

  1. Down Payment– The biggest and the most important payment out of it all. How much down payment you have and what is the future value of this down payment.
  2. Mortgage – Calculate your monthly mortgage payments if you are going for it(with these interest rates, you should).
  3. Upgrades– There are many upgrades that a builder or a previous home owner does not provide. For example a new A/C or new flooring required.
  4. Maintenance fee– If you are not buying a free hold property, there is going to be a maintenance fee. In condos it is usually a cents per square feet value.
  5. Parking Fee– There are developers who include free parking and some who charge for it extra. There may be some monthly parking maintenance charges.
  6. Locker fee– Usually condominiums have a locker outside of the unit, so there may be a lump sum and monthly maintenance fee.
  7. Land transfer taxes- These taxes vary on from different municipalities. Some incentives may be available.
  8. Interest on mortgage– The interest rate you get on your mortgage determines the long term amount you would be paying for the house.
  9. Electricity costs- Depends on your terms with the tenant.
  10. Water– Same concept as electrical costs. Some condominiums have these costs included in the maintenance fees.
  11. Usual repairs– These are the costs involved in day to day repairs. It can be an appliance repair or a plumbing issue.
  12. Long term repairs– a roof might be needed in 15 years or all appliances might need change after 10 tears. There is a fund that needs to kept aside for these major costs.
  13. Vacancy Cost– The time period in which the unit is empty between tenants is a cost to the owner. This cost needs to be considered while calculating the cash flow.
  14. Tenant acquisition fee– To get tenants there will be a commission that the landlord pays either to a realtor or to any other agency.
  15. Travel– If you are spending money in travelling for collecting rent or maintenance, you should factor in those costs as well. Tip: Travel costs are entitled to tax deductions in most cases.
  16. Costs of Marketing and Advertising- You can negotiate with you agent about who pays for that.
  17. Insurance– To protect your investment from unforeseen circumstances. Annual costs must be divided into monthly and added to other costs.
  18. Rent Collection Fee– There are many services available nowadays which assist you in collecting your rental income from one to as many rentals you have. Can be automated as well. Can be around 1%.
  19. Income Tax– The amount of extra tax you would pay needs to be deducted from the income of the unit.
  20. Property Management– A very common and hassle free way to manage a rental property. Usual fee is around 8-10% of the monthly rent.
  21. Mortgage Insurance– Depending on your lender and your down payment, it may be mandatory.
  22. Home inspection– Getting Inspected what you bought by a professional makes sense. Costs can vary from around $200 onwards
  23. Title insurance– Most lenders require you to have lenders title insurance. Homeowner’s title insurance is majorly optional.
  24. New Home warranty– The builder pays for the fee but may pass it on to the buyer. Costs around $385 to $1500.
  25. Appraisal Costs– Unbiased estimate of true value of home. Can range from $300 to $500.
  26. Service hook up fee– Initially when home services are installed, different companies may charge you one time installation fee. Example internet installation fee.

The idea behind this information is not to scare anybody but just to educate that with right guidance and analysis, you can determine the best options for your investments. You can connect with me anytime at mail@yatin.ca to get furthur information and also deals that can make you cash flow positive after all these costs. Our analysis factors every detail and helps you make the right decision.

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