Many have asked just what kind of expected and unexpected costs may be involved with owning an investment property in Orlando FL? While I provide my clients a spreadsheet breakdown of the estimated costs based on each individual property they are interested in, below is a general breakdown of the 6 direct costs to owning investment real estate……
Cost 1: Mortgage Costs
If you will be financing the property this will likely be your largest monthly expense. Specific costs of course will vary depending on the loan terms you receive as well as if you will even have a mortgage or be purchasing the property in cash. We work with several local lenders with Foreign National loan programs if you where interested in financing your purchase.
Cost 2: Property Taxes
Property Taxes will vary based on the value of the property you buy and where it is located. For a more detailed explanation on how to estimate taxes on any particular property see “How to Estimate Yearly Property Taxes.”
Cost 3: Homeowners/Condo Association dues
These fees can range from $0 to several hundred dollars a month depending on the property. Association dues typically cover community maintenance and amenities and can add value to a property when you re-sell it and while you rent it. Single Family Detached homes typically have the lowest HOA dues as they just cover maintenance of community areas and if they have them, their amenities. Townhomes and Condo’s have higher HOA dues but can reduce your costs in other areas. Most attached townhomes and all condo’s include structural property insurance that cover insurance of the property from the drywall out, so when you purchase insurance you only have to purchase a condo policy for liability and interior improvements. Most also cover exterior maintenance like painting the exterior, replacing the roof, and maintaining your landscaping.
Cost 4: Insurance
When partial insurance is covered in HOA dues this cost can be as low as .25% of the cost of your property per year. Otherwise for Central Florida properties insurance can range from .5% to a full 1% of the cost of the home. Prices can range greatly however depending on a number of factors including the age of the property, how it was built, if it’s in a flood zone, how high a policy limit you want and several others. The only way to be 100% sure of this cost and what insurance you will need or want is to get quotes from several local companies.
Cost 5: Maintenance
This cost will obviously vary by property and with luck. But it is always a good idea to set aside at least 5% (less if exterior maintenance is included in HOA dues) of the rents you collect for unexpected and expected repair costs.
Cost 6: Management
If you won’t be able to handle the day to day management of your property, which can be impossible to do from thousands of miles away, a property manager is a must. A property manager’s costs will vary depending on the type of property you purchase.
For long-term rental properties property management is pretty straight forward. A good manager will get several bids from contractors that can get your property in rentable condition quickly and usually free of charge depending on the extent of repairs needed. They will handle the marketing, background checks, security deposit collection and lease signing with their charge only due upon tenant move-in the initial work to advertise and lease a home will usually cost a leasing fee; I would budget between ½ month and 1 full month’s rent for this one time fee. To handle the management of everything (from collecting rent, to property inspections and handling tenant calls) there is no standard set charge, but for full service property management but I would estimate 10% of collected monthly rents as an ongoing expense. On occasion extra things a manager may collect funds for would be unexpected maintenance costs for repair, or to handle an eviction should it become necessary.
Short-Term Rental properties have some additional issues and costs. Management fees will vary greatly from company to company as each will include certain additional services in their fees while others will charge them separately. The typical company charges a monthly management/marketing fee whether the property is rented or not to cover marketing expenses and checking up on your vacant property. When your management company places a booking they typically will charge another % of the rental amount collected. Be sure to find a company that will only charge a booking fee if THEY actually place the renter; some will allow you to book the property yourself and not charge the fee, others will only allow bookings to go through them. There is also usually a cleaning fee after every booking that can vary. Other costs include state licensing fees for operating a hotel as well as the costs of keeping utilities on while vacant.
Comments(0)