Investing into real estate is one of the favorite of Robert Kiyosaki in generating cash flow.
However, there are various expenses, some of which are unavoidable, which could eat into your bottom line.Â
David Litsky (davidlitsky.com) listed 5 of the most common real estate expenses, excluding mortgage payments.
- Real estate taxes; also known as property taxes, areÂ assessed on the land and building value for your property. These expenses cannot be reduced or mitigated because theyÂ 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 toÂ 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 Â 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.
- UtilitiesÂ are traditionally split between tenant and landlord with the former paying utilities related to personal living expenses.Â 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, handlesÂ 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.