5 Biggest Expenses When You Take On a Renter
BOSTON ( MainStreet) If you have a vacation property or second home that sits unused for portions of the year, it may make sense to rent it out. Whether you offer a long-term lease or short-term stays via sites such as airbnb, there are expenses associated with opening your property to a renter and experts caution that many first-time landlords don't understand how quickly the overhead and incidentals can add up.
Here's a look at the five biggest expenses associated with renting out your property.
Renter turnover is one of the biggest deciding factors that can turn your property into a source of cash flow or a money pit, says Michael Corbett, Trulia's real estate expert and author of Before You Buy .
"This really is the biggest consideration," he says. "People think if one renter doesn't work out they can just move in a new one and that's true but the cost in doing so can be substantial."
For example, if you rent your apartment out for $1,500 per month, when someone moves out and leaves it vacant, you'll lose $1,500 on that month's rent, Corbett says. This is to say nothing of the cost to clean and spruce up the apartment properly for the next renter.
"When a renter moves out and a new one moves in, the carpet will need to be cleaned, the walls will need to be spackled and painted, and that's if they've been there for a month, a year or five years," says Vik Raghavan, co-founder of apartment finder RentalRoost.
There's a reason hotels have such a huge maintenance staff, Raghavan says.
"Moving in and out is an inherently damaging process. There's wear and tear with every move more if your renter has kids or pets," he says.
Even if you have a neat renter who lives alone and never hung anything on the walls, the property will still require a major scrub down when they move out, Corbett says. A professional cleaning service typically charges around $300 for a small apartment or condo.
"It has to be sparkling clean when a new tenant gets the keys. They aren't going to move in to anything less than spotless," he says.
Renter "landlord" insurance:
Although renter insurance (also called "landlord" insurance) is optional, it's a good investment, Corbett says. It typically costs more than a regular homeowner's policy, but offers a lot of great coverage that protects you and the property.
"It's becoming a lot more popular lately," he says. "It covers you if the property burns down because the tenant starts a fire or causes other damage. If you're renting a property with just regular homeowners insurance on it, the insurance company can deny your claim. A rental property insurance policy is completely different, and you need it to protect yourself."