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Investing in Atlanta rental real estate can be a great way to earn some consistent and recurring rental income while setting yourself up for profitable long-term returns. There’s a lot of opportunity in the market, and as long as you’re able to keep that rental property occupied with good tenants and well-maintained, there’s money to be paid.
There are expenses too, however, and some of the costs that come with renting out a home are not obvious.
They’re hiding.
We’re coaxing them out into the open today, showing you what the true expenses can be when it comes to owning rental property. Let’s get some clarity on those overlooked or unknown costs.
Before Your Buy: Costs Associated with Acquiring a Rental Property
When purchasing a rental property, the most obvious expense is what you spend to buy the property. You negotiate the purchase price and that’s what you spend. But that’s not all you spend. Beyond that, several upfront costs can impact your budget:
Closing Costs. These can include loan origination fees, title insurance, and appraisal fees, which can add up to 2-5% of the property's purchase price.
Inspection and Repairs. Conducting a thorough property inspection before buying is crucial. Any unexpected repairs can quickly chip away at your profits.
Renovation Costs. Depending on the property's condition and market demands, you might need to invest in renovations to make it rent-ready.
You’ll want to have these hidden acquisition costs included in your budget. There are also the costs for property insurance and taxes to consider. Those will depend on your property and how you’re financing the purchase.
Landlord insurance typically covers property damage, liability protection, and loss of rental income. The cost can vary depending on the coverage and location, so it's important to shop around for quotes.
Property taxes vary significantly based on location and property value, so understanding the tax rate in Atlanta is essential. Keep in mind that taxes contribute to your annual expenses, but it's wise to account for them initially to ensure affordability.
Marketing and Tenant Acquisition
You might expect that tenants will simply show up and want to rent your property. That’s not the way it usually works. You’ll have to do some marketing and advertising to attract good tenants to your property.
Once your property is ready for the rental market, it’s time to put together a listing and share it with the Atlanta rental pool. Plan for how you’ll pay to market your property. If you’re going to hire a professional photographer, that’s a cost. Even if you’re going to take the photos yourself, you’ll need to prepare the property for these marketing photos. That might mean having a professional cleaner come in ahead of the photo shoot.
Other marketing costs can include online listings, photography, and signage. A well-prepared marketing strategy can help minimize vacancies and maximize your return on investment. It’s worth the money you spend, but you have to be prepared to spend it. Syndicating your listings across multiple rental platforms is a great idea, but it will mean a fee.
Maintaining Your Atlanta Rental Property
For many Atlanta rental property owners, maintenance is their largest expense. This covers emergency maintenance, routine repairs, and preventative services. You’ll find there are some maintenance expenses you can prepare for. Pest control services, for example, are recurring. Landscaping services are, too. You might know you have an HVAC technician coming to the property every year to inspect the heating and cooling unit.
Here are the maintenance issues that tend to take rental property owners by surprise:
Plumbing Issues
Even with meticulous care and routine inspections, plumbing problems can occur without warning. From leaking faucets to burst pipes, these issues require immediate attention to prevent water damage. Regular inspections and maintenance can help mitigate risks, but it's wise to set aside funds for unexpected plumbing repairs. Water can be a big problem for properties, and you’ll want to be prepared to respond right away.
Roof Repairs
The roof is one of the most vital components of any property, protecting it from the rain and the sun and other weather elements. However, severe weather conditions and natural wear and tear can lead to leaks or structural damage. Regular inspections and minor fixes can extend the life of your roof, but budgeting for potential major repairs is prudent.
HVAC System Failures
Heating, ventilation, and air conditioning (HVAC) systems are essential for tenant comfort. Regular servicing can reduce the risk of unexpected failures, but these systems can be costly to repair or replace when they do break down. Having a reserve fund dedicated to HVAC maintenance can save you from hefty, unexpected expenses. You want to be ready to respond to any issues with your heating and cooling. Tenants will need both, and it’s an important part of preserving the value and condition of your property.
Electrical Problems
Electrical issues can pose safety hazards and disrupt your tenants' daily lives. Whether it's faulty wiring or a malfunctioning circuit breaker, these problems need immediate resolution. Including a budget for electrical repairs in your financial planning can prepare you for any surprises.
Pest Control
No property is immune to pest infestations, and they can cause significant damage if not addressed promptly. Regular pest control measures can prevent invasions, but unexpected outbreaks might still occur. Budgeting for occasional pest control treatments is a wise preventative measure.
Appliance Repairs or Replacement
Appliances have a finite lifespan, and they often fail without warning. Whether it's a refrigerator, stove, or washing machine, having funds set aside for repairs or replacements ensures that your tenants aren't inconvenienced for long periods. Keep track of your warranties, too, so you’re not spending more than you must.
Understanding the importance of budgeting for repairs is essential to maintain the value of your property and ensure tenant satisfaction. Regular maintenance and prompt repairs can prevent minor issues from becoming costly disasters, ultimately saving you money and protecting your investment.
Don’t spend more on maintenance because of hidden costs you never saw coming.
Vacancy and Turnover: Often Unexpected
As investors and rental property owners, we expect our properties always to be occupied.
But unexpected turnover and vacancy can quickly eat into your profits. Understanding the true costs associated with these challenges is essential for rental property owners who want to maintain a healthy bottom line.
The Hidden Costs of Vacancy
When a rental property sits vacant, the financial impact extends beyond the loss of rental income. The associated costs include lost rental income. This is the most obvious cost. Every day a property is vacant is a day without income, and that’s income you’ll never be able to recover.
There are also the maintenance costs associated with turning a property over. You can use the security deposit of the departing tenant only to repair damage. The wear and tear will be your financial responsibility. You’ll have to invest in fresh paint. Professional cleaning. Updates and upgrades that help to get the property ready for a new tenant.
And where will you find that new tenant? Advertising and marketing costs have to be included when you’re budgeting for a turnover. Finding a new tenant typically involves listing the property, which can incur costs for online listings, signage, and possibly paying commissions to agents who ultimately rent your property.
You’re also responsible for utilities during a turnover. You cannot have your lights off and your water not running when you have repairs to make, cosmetic upgrades to attend to, and showings to support.
Avoiding Turnover Costs
Turnover can be even more expensive than vacancy. There’s a lot to budget for, and the goal is to retain the tenants you currently have in place to avoid these costs. Enhance tenant satisfaction and improve retention by building stronger relationships. Engage with your tenants and address their concerns properly and promptly. Good communication, shared expectations, and solid relationships will keep your tenants in place. Reasonable rental increases are important, too.
Financial Management and Accounting: Atlanta Property Management
Working with an Atlanta property management expert is an excellent move when you’re trying to avoid hidden costs and stay a step ahead of all the expenses that come with leasing, managing, and maintaining a rental property.
Your property manager will understand what kind of budgeting needs to be done, whether we’re talking about marketing or preventative maintenance. We negotiate the best rates with local vendors and service providers, allowing us to provide good budgeting advice and timely repair services.
We can also provide the type of accounting and financial reporting that allows you to better understand the costs that you’ll need to cover as a rental property owner. You can expect accounting statements and financial reports in real time, through your online portal which is easy to access and full of important information.
Let’s talk about what you should be prepared to pay during the acquisition and operations of your rental property in Atlanta. Please contact Property Services of Atlanta for more information by calling (770) 426-1150.