7 Hidden Costs In Detroit Real Estate

Hidden Costs In Real EstateMost expenses that come with real estate investment are fairly obvious to savvy investors. However, outside of property taxes, insurance costs, and utility upkeep, you may not be aware of the hidden costs that come with every rental home or apartment. We’ve complied a list of the most notable hidden expenses and fees, in order to keep you prepared for every bump in the road.

  1. Maintenance – It is safe to assume that maintenance will be eating up potentially 10 – 20% of your rental income. Additionally, it will take up even more space in your profits, if you don’t have your maintenance system under control. Make sure to set aside money for these expenses.
  2. Management – Most property managers will expect around 9% of the rent to maintain the property. You may catch a break with a multi-family unit, and a property manager may only expect 5%. This is something to consider when you are not looking to manage your property on your own.
  3. Permits – The little things always add up! Fees like rental licenses, inspections, and other legal hoops that the city of Detroit may put you through could mean anywhere from $50 to several hundred dollars tapped into your budget.
  4. Screening Tenants – If you are looking for reputable people to place inside your rental properties, we would highly recommend screening them. Each screening could cost up to $40 per person, so make sure to be selective and aware of these fees.
  5. Mileage – Especially when you first purchase a property, driving to and from the location will be an added expense that can quickly pick up speed. Additionally, you’ll be driving to sign paperwork, meet with contractors, picking up keys, and the list goes on. With several trips occurring each month, this is another expense to consider.
  6. Tools – Are you planning on keeping up with your own maintenance? If so, you’ll need to invest in a quality set of tools. Unfortunately, this definitely comes with a high price tag.
  7. Insurance – While this may seem like an obvious expense, have you considered the idea of liability insurance? Especially if you are managing multiple properties, business liability insurance should be something to consider.

The moral of this lesson is while you may think you have all of your expenses lined up, there are always more that can sneak up behind you when you’re least prepared and expecting them. Always set aside what you feel is a suitable amount of money to coast through rough periods and handle any unexpected issues.