If you’re looking to add residual income with an investment property, then you will need to understand the specific Atlanta rental property costs. Some costs will vary depending upon city, state and region you are in. Be sure that you research rental property costs as close as possible to the actual location. Once you’ve purchased and set a rental price is not the time to discover new or actual costs.
Atlanta Rental Property Costs to Consider:
Purchase costs: These are your upfront purchase costs including loan fees, closing fees, interest payments, your downpayment. All of the costs associated with purchasing your investment property are included here. After these costs you will have a mortgage payment that details how much prinicipal, and interest you pay with each payment.
Property taxes: Property taxes are included in your mortgage payment, so during your first year of your investment property purchase, they are accounted for. In subsequent years the property tax effect can drive the monthly mortgage payment higher. This tax amount will be dependent upon whether your estimated home value increases or decreases and whether or not your county millage rate increases or decreases.
Maintenance costs: Costs for maintaining a rental property are part of the cost of being a homeowner or a landlord. Appliances breakdown, systems fail, roofs or basements leak …stuff happens. You’ll need to estimate an amount to set aside for routine maintenance. If you’ve been a landlord for a while you likely have a good understanding of what’s required. If this is your first investment property, you have to use some formula to estimate an amount. Fannie Mae recommends that you set aside 2% of the property value for annual maintenance costs. On average 1-3% of the property value seems to be the average amount set aside.
Insurance: Much like your primary residence you will need insurance coverage for your investment property. Instead of a homeowners policy, though, you need a landlord policy, also known as a dwelling policy. There are three dwelling options:
- DP-1: Typically covers vandalism and fire. This is usually on an actual cash value basis so depreciation is factored in.
- DP-2: Covers named perils like fire and vandalism, but also includes windstorm, hail, etc. May be handled on a actual cost or replacement cost basis.
- DP-3: An open peril policy that covers things unless specifically excluded. Typically this is on a replacement cost basis, so depreciation is not a risk.
While the above takes care of the indemnity side of insurance, you also need to ensure that the liability side is protected. The difference in cost between $500,000 coverage and $1,000,000 of coverage is only a couple of hundred dollars annually, so we recommend going with the higher amount.
Utilities: Depending upon how you structure the contract you may or may not be responsible for some or all of the utilities. It really depends upon the market, as covering some utilities can be a good marketing offer. Even if the renter covers all of the utilities you will need to be prepared in case the property becomes vacant. If so, you will then need to handle the utilities until the unit is rented once again.
Vacancy: If you unit is not rented you have to cover the costs and expenses during the vacated period. If you’re lucky enough an your property remains rented its not an issue. For planning purposes you should budget and set aside about 10% of rents to cover future vacancy time periods.
These are only a few of the Atlanta rental property costs you might encounter as a Landlord. Additional costs might include advertising your property when its vacant, hiring a property management company to manage your unit (s), and other unexpected costs. You can’t plan for everything so its wise to build up a emergency fund for each property.
If this all seems confusing or time consuming, maybe you should consider hiring a property manager. GSPM assists property owners and investors in maximizing revenue potential while minimizing the hassles in marketing and managing their properties. We recognize that there are a lot of factors that go into making a property a successful investment and put our experience and knowledge to work for you. Call us at 404-254-4502 or complete our Fast Form to learn more about our services.