We believe that owning an investment property is a great decision for many people. There are some hidden costs that investors do not consider when looking to get into rental properties, and we will take a look at them today.
Maintenance and Upkeep
This is a big hidden cost of investment properties that many people overlook. According to the US News the average homeowner spends between 1 and 4 percent of their homes value on maintenance and upkeep. The older that your home is the higher some of the costs can be. Our second home was built in 1978, and there are a few updated that we will need to be making in the upcoming years. We need to replace the fence and update the backyard this summer, and will need to re-shingle the roof in the next 5 years. Both of these project will cost between 4-10K dollars each.
Of course, you don’t have to put money into up keeping your property, but doing so will have a negative impact on the amount of rent you can get, and the type of person willing to rent from your hovel. Home upkeep is always worth doing.
And make sure that your keep all of your receipts! The benefit of maintenance and upkeep on a rental property is that it is all tax deductible! This is a business expense!
Property Tax
Even though you may not be living on the property, you do still have to pay property tax. If you want to find out what your yearly property tax will be you can check it our here for Calgary, Vancouver, and Toronto.
You will want to make sure that you incorporate your property tax into your monthly mortgage payment costs so that you can accurately decide on a fair rent.
Income Tax
Yes, the money that you get from your rent is taxable. Some people skirt this by getting paid under-the-table, especially with illegal suites, but please trust us, it is not worth it.
If you are interested in turning your illegal suite into a legal one learn how to get started here.
If you have a spouse, you can split the income between the two of you if you both have ownership in the house. Before you make any decisions in this area however, I would highly recommend that you talk to a chartered accountant on how to best organize your investment properties.
Conclusion
We hope that you feel more prepared for the costs that are involved in rental property ownership. Wit this knowledge you should be able to better judge your properties and make sure that you can make the most amount possible with them.
Happy renting, and tell us your stories in the comments!
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