Considering the promise of regular monthly cash flow and long-term appreciation, investing in rental properties seems appealing; however, there are a number of both hidden costs that the potential property owner should watch out for. Although monthly mortgage payment is an obvious expense, it can still come along with a horde of surprises. Before you start looking for rental properties, go through the following considerations to deduce whether an investment in rental property in Fort Collins CO is going to be a money pit or a windfall.
Mortgage
Properties for investment are considered riskier than homes since it is not the primary residence of the borrower. On average, property owners should expect about 1.5% more than advertised mortgage rates.
Potential property taxes
Depending on the locality of the purchase, your property taxes are likely to significantly add to your property cost. It is crucial that you get in touch with your municipality and make sure that the listed taxes on Multiple Listing Service are correct. It is also a great idea to inquire what services you should expect from the taxes paid.
Homeowner insurance
The property experts at All Property Services, Inc. warn that, depending on your locality, insurance can significantly vary. This is especially true in areas prone to perils such as fires and flooding. Talk with your insurance company before signing that property contract.
Maintenance costs
It is advisable to budget about 10 to 15% of the property’s annual rent for upkeep and maintenance of the property as well as any other damage caused by tenants and ought to be covered with their security deposits.
The association fees
Some homeowner associations and condominiums require members to submit a monthly fee to be affiliated with them. Such fees need to be considered in your budget. If you are a member of an association, ensure that there are no rules against rental properties.
Other costs that should be considered before buying rental property in Fort Collins CO include cost of utilities, tenant search costs and vacancy allowance. Once you have added together all the expenses and still in the black, rental property might actually be a good investment vehicle.
