Five Common Real Estate Expenses

When owning real estate you will find that there are a number of expenses taking away from your bottom line. A number of these costs are unavoidable and will vary depending on the location of your property or number of tenants, while others can be reduced or even eliminated. I have listed five of my most common expenses below, excluding mortgage payments.

• Real estate taxes; also known as property taxes, are assessed on the land and building value for your property. These expenses cannot be reduced or mitigated because they are set by the local government.
• Property insurance is integral for any owner because it protects you against damage to your real estate and any personal injuries that occur on the property. The cost to insure your property depends on a number of variables including but not limited to property value, building value, and number of families living on the premises. Try negotiating with a few insurance agents to get the best deal on property insurance.
• Repairs and maintenance  will vary from year to year ranging from minor expenses to major repairs. Annual costs will include cleaning of common areas, touch ups to the property at the end of lease terms, and general maintenance. Uncommon or extraordinary expenses include the replacement of major appliances, repairs to the building structure (for example the roof), or major renovations. It is a good tip to set a reserve of annual income to cover major repairs when they arise.
• Utilities are traditionally split between tenant and landlord with the former paying utilities related to personal living expenses. The landlord typically pays common utilities including water, sewer maintenance, and a portion of electricity. In certain situations; such as properties located in extremely hot or cold climates, landlords may opt to pay for a larger portion of the utilities.
• Administration fees occur when you hire a third party to handle the management of your property. The property manager collects rent, handles maintenance requests, leases the property, and handles other property management. Your costs will vary depending on how much of the management is handled by a third party. To save money, some or all of the management can be handled by the landlord.

Remember, this is just a guideline and your mileage may vary.

Technorati Tags: Banking, Commercial Lending, Real Estate Taxes, Property Insurance

Posted on March 28th, 2007 | By: bootstrap economist | Filed under Banking

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