4 hidden costs of being a landlord Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure
Advertiser Disclosure
We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: August 12, 2010 Margarette Burnette Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Life as a landlord may be tempting to homeowners unable to sell their homes and others looking to add properties to their investment portfolio. However, many costs associated with properties catch novice landlords by surprise. The following are four hidden expenses experts say new landlords should consider. 1 Increased insurance costs
For example, homeowners who cannot sell their homes should be aware that renting out the home changes the owner’s status from primary occupant to “investor,” says Brian Mikelbank, an associate professor of urban studies at Cleveland State University, in Ohio. Find the best mortgage rates Bankrate can help you find the lowest available mortgage rate. The tenant rent payment may help cover the increased expense, but Mikelbank says landlords shouldn’t always count on it. “Homes will usually have tenants for less than 12 full months out of the year, since it takes time to find a renter, or a tenant could potentially leave before their lease is up,” he says. 2 Legal fees and administrative charges
“Some attorneys will charge a flat rate of about $200 for landlord services,” Sevajian says. Other lawyers may charge by the hour. Owners should also be prepared to pay for additional work if a tenant needs to be evicted, or there is some other legal dispute, she says. In addition to legal expenses, landlords will have to pay for administrative costs related to interviewing potential tenants, running their histories and checking references, Sevajian says. Property management companies can handle these tasks for the property investor, but typically charge about 10 percent of each month’s rent for their services. Many municipalities require owners to register rental homes and make them available for examination, Mikelbank says. “The city will send out an inspector to make sure the property is up to code,” Mikelbank says. If there is a defect, the owner will have to pay to fix the problems, he says. Some municipalities also ask new landlords to attend day-long training classes that cover topics such as how to find good tenants, best practices in property management, and how to spot and report potential illegal activity. Mikelbank says more cities are offering these classes because of an increase in “casual landlords” who may not understand all the legal regulations involved in owning rental property. Fees for these administrative services add up. “The cost for registration, inspections and training can be a couple hundred dollars a year,” Mikelbank says. 3 Cleaning care and maintenance costs
So, and decide instead to rent their home should plan to spruce up the place — just as they would before a sale. “The same upkeep problems that could be holding a house back on the ‘for sale’ market could also be holding it back from the rental market,” Mikelbank says. “The difference is, houses can be sold ‘as is,’ but a renter may not be willing to rent ‘as is.'” When a tenant does move in, the landlord may be contractually obligated to fix new maintenance issues, such as a leaky toilet, Sevajian says. Once the tenant moves out, the landlord will need to spend more money to clean up the home for the next resident, she added. Landlords should be prepared to pay these expenses out of pocket, Sevajian says. “Owners can require a security deposit to help cover certain cleanup costs, but it won’t pay for everything if the tenant stops paying rent early or badly trashes the house,” she says. 4 Increased taxes
These tax breaks don’t apply to investment property. So, new landlords should be aware that they may have a higher tax burden on their investment property. This issue is especially pertinent to homeowners who turn a primary home into a rental. An owner will probably have to give up the homestead exemption if he or she moves out of a property while continuing to own it. This would mean higher property taxes. Once the real estate market rebounds, an owner may decide to put his or her home up for sale, Mikelbank says. But if that person hasn’t lived in the dwelling for at least two of the previous five years, the owner likely will lose his or her , which allows individual filers to keep $250,000 of profit from the sale tax-free. Of course, other expenses related to rental properties actually generate tax breaks for the landlord. Mikelbank urges novice property investors to talk to an experienced tax professional to understand how becoming a landlord could affect the individual’s tax situation. Get more news, money-saving tips, and expert advice about mortgages and real estate by signing up for a . Related Links: Group coupon craze comes to real estate Mortgage Rate Trend Index: Nov. 3, 2011 Related Articles: Selling in a soft market SHARE: Margarette Burnette Related Articles