There are two differing opinions on investing in real estate. One says that buying property is a depreciating investment as, over time, the house would deteriorate. You would need to keep spending to maintain it. The other opinion believes that properties rise in value over time, especially if development had been done on the land.
Is there any profit to be made from real estate? Both opinions have quite good arguments. Let’s go through some basic expenses you would need to bother with as a landlord.
Think of the taxes you need to pay.
First of all, you will, of course, be paying taxes. Taxes would depend on the locality of your properties. If you’re spreading your properties in different states or different neighborhoods, the rates would also vary. If your properties were declared commercial, like when you rent out units for businesses and offices, taxes would even be higher. You can consult people who specialize in tax planning so that you could preserve your assets. Learn how to lower your taxes but at the same time comply with these requirements.
You need to maintain basic utilities.
Unless the unit wouldn’t be used for several years, it is best to maintain the connection of basic utilities like electricity and water. It means you would be paying the basic fees even when there are no renters. It’s also advisable that you continue with maintenance work, have it cleaned and aired from time to time so that it doesn’t fall into a decrepit state while no one is occupying.
Buildings deteriorate faster when not used because no one notices the start of some cracks or leaks. Some fixtures could also rust or accumulate dust and grime when they’re not used regularly. The building material itself, like concrete, could also deteriorate faster when exposed to natural occurrences like the seasons if there are no mitigating measures such as heaters or other methods to keep the building warm or cool when it’s too hot.
Basic pleasantries don’t need to be expensive.
Although we see so many ads of luxurious interiors promoted by several real estate agencies, these are not required. Those are most likely targeting high-end markets. Having a good sense of aesthetic is enough to maximize simple and inexpensive materials. It’s even better you have basic features in your properties so that your tenants will have some freedom in designing it.
Paint your walls with a simple white or cream tone. Ensure the floor is even and polished so your occupants could opt for the bare industrial look or put on removable tiles. You don’t have to spend on floor tiles except for the ones in the toilet and kitchen sink. Provide simple light bulbs. Instead of spending on dimmers, lamps, and chandeliers, provide several windows to let in natural light. It could also prevent your building from becoming musty and moldy.
Provide basic furnishing if you’re targeting a younger market.
Students or young professionals would opt for rentals that would already provide for some of their basic needs. They wouldn’t be too preoccupied with interior design at that point in their lives. They would prefer a semi-furnished place as they wouldn’t have to spend money on the furniture.
For the bedroom, have at least a bed frame and a cabinet. The tenants could provide their foam. That way, you wouldn’t be burdened with soiled foam when the tenant moves out.
Have a simple dining table, preferably cheap enough to dispose of if it gets too dirty or scratched. Provide a couple of benches instead of a cushioned sofa, again, for sanitary purposes.
Paying a realtor that suits your needs.
People looking for properties have different preferences for realtors they would trust. You have to maintain the rent rate in the area, but at the same time, you have to think about the percentage realtors will be taking. Established realtors might get a higher cut than those that are still starting. But they could find tenants faster than those that are still practically unknown. You could also find a company that deals with properties in different states. Check their terms carefully and make sure you’re not losing out on opportunities.
Share the upkeep of your properties with your tenants.
You could require tenants to clean it or have things repaired before moving out. Some require a deposit that could be used to repair what’s been destroyed. The balance is returned to the renter. Put all of these into your contract so that your tenants would be aware of this and could not refuse this commitment at the end of their stay. On your end, have everything in good condition when they move in. It would be unfair if the heater stops working because it had already been broken, and yet you make them replace it.
Yes, buildings deteriorate over time, and you need to spend to keep them in good shape. But repairs and renovations are not done often. Furnishings are provided just once if you’re able to strike a deal with tenants to replace them if they get broken. If your properties are at a prime location, you could get a good rate. One or two months’ worth of rent should already cover all the maintenance expenses you would need for the year.