Leasing out property is a risky business even for experienced landlords. It’s best to be prepared for the reality of unexpected costs and losses that are out of your control by factoring it into your budget ahead of time.
To give you a head start on what to expect, here are some of the biggest ways landlords lose money.
Taxes and Regulations
A standard part of property ownership is the expenses of taxes and government regulations. Leasing out your property as a landlord comes with its own set of regulations as well.
The two most costly areas regarding government intervention include government rental inspections and rent controls. Inspections occur in cities that require landlords to register with the city for the purpose of tighter regulations. This can cost you money in the form of fees and fines should any code violations be found.
Rent controls can also dent your wallet as they prevent you from raising the rent to combat any additional raises in costs you experience. Additionally, if you are forced to cut costs in other areas as a result, you may experience a deteriorating property and a drop in tenants.
Bad Tenants
A bad tenant can quickly become a very costly experience. Some of the biggest problems from tenants that can lose you money include:
Being noisy or problematic enough to drive away neighbors and other tenants
Not paying rent or fines
Excessive maintenance requests
Lawsuits
That said, having too few tenants will also cause obvious and often substantial loss as you will not be receiving any payments for the duration of the vacancies. While you shouldn’t be afraid to be picky with your tenants to ensure you minimize bad experiences, it is important to keep your units occupied as much as possible.
Unexpected Maintenance
Finally, any business venture comes with unexpected costs related to the relevant risks in their industry. For landlords, unexpected maintenance is a large part of this risk.
Some of these will come in the form of little costs, such as simple bad luck with appliances or tenants who don’t properly respect their surroundings. More major costs may come in the form of catastrophes like fires or natural disasters. It is best to stay prepared for disasters that are common in your area and not to cheap out on appliances, even if it leads to more expenses at first.
No matter how prepared you are, property ownership is full of financial risk. Minimize your losses by learning your rights and protecting your assets and contact Onyx Group Legal today for a free consultation. Our team is ready to provide the knowledge and advice that will ensure you protect your finances and your rights as a landlord.