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If you’ve become a landlord, then ideally you’ll want a rental that will produce a positive annual cash flow. Below are listed some optimal ways to save and spend money effectively in order to produce a larger return on interest. Chances are you won’t be receiving rental income year round. Even if you are in an area where your property is in high demand, transition time between tenants can take a month or two. Varying widely between urban and rural rentals, the nationwide vacancy rate runs around 10%. Also different regions of the country, neighbors, and type of house will factor into your vacancy time. Check with a local real estate broker or reference librarian for your area’s vacancy rates. Rental income is never going to be pure profit. Projected property taxes, mortgage payments, insurance, utilities, repair and maintenance costs need to be factored in. If you don’t wish to deal with your tenants directly, then property management fees, which can be 8% to 10% of the rental income will need to be accounted for. If you’ve put off major repairs such as replacing the roof or furnace, then maintenance costs might be rather high. As a landlord it is your duty to keep the property in habitable condition. The rent of your property – determine your worth. Check your local listings for properties of a similar size and quality to yours, ideally within the same neighborhood. This will give you the general sense of worth your apartment will have in a specific area. Making extravagant upgrades and changes may not be the best idea if you’re not in a neighborhood which invites those looking for a more upscale place. Budget properly! In order to do so you’ll need to calculate your projected profit; to accurately calculate your projected profit you’ll need to subtract expected vacancies and likely expense from the annual projected rent. Having a positive annual cash income of $1,200 to $2,400 ahead each year (which equates to about $100 to $200 per month), you’re doing very well by the industries standards. A huge saver is going to be TAX DEDUCTIONS. The tax code is stock full of deductions for landlords. Small residential landlords especially have significant tax deductions available. Landlords can deduct HOME OFFICE expenses from their taxes, as long as they meet certain requirements of course. The DEPRECIATION of your rental home or apartment can be deducted over a number of years (27.5 for residential rentals. If you have any walls that need repainting, leaks or broken windows that need fixing, or if your plastering needs to be replaced then deduct these expenses from your taxes. REPAIRS are fully deductible in the year which you pay for them. If you need to TRAVEL any distance to your rental property those travel expenses can be deducted. The IRS carefully scrutinizes these deductions so learn the rules and keep good records. Over the last several decades property values have been on an upward trend. Gains have slowed recently, and nothing is guaranteed, the U.S. population pressures suggest that the long-term trend will continue upward. As always, the longer you wait, the more the property is like to appreciate in value. There are many people out there who make their living by buying, renting out, and ultimately selling real estate. If you only own one property other than your primary residence, odds are you’re not one of those big-time real estate investors. Many love the independence, and the chance to put a little sweat and creativity into the quest for higher returns. If you do decide to be a landlord, make sure you start things on the right foot. Having a professional renting contract ready-made will insure that you specify all of your wants and desires to your future tenant. Never leave yourself in a position where you could be taken advantage of, or where you don’t clearly state what you require in order for a person to rent from you.
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