It is very important to estimate and budget for rental expenses. A profit and loss statement is the best way to do this. This is a report that shows the rental property’s income, expenses, and profit. It makes sure that you know your monthly and yearly net profits so that you can see a return on your investment. The good news is that you can write off a lot of your rental property expenses on your taxes, so keep track of what you spend.
A good investment is to own a rental property. You’ll get rent payments regularly, but you’ll also have to pay for a lot of other things. If you know about these common rental property costs, you’ll be better able to plan your budget and get a return on your investment.
Most of the time, these expenses are at least 35% of the home’s gross operating income, but this can change. Talk to other property owners in your area and do some research to get a good idea of how much you’re likely to spend. Here are some typical rental property expenses to be aware of.
Types of Rental Expenses
Some of these as well as other less common ones are discussed in the following slides.
- Marketing and advertising
- Auto and travel
- Cleaning and maintenance
- Commissions
- Depreciation
- Insurance
- Interest (other)
- Legal and other professional fees
- Local transportation
- Tenant screening
- Management fees or property management fees
- The mortgage interest paid to banks, etc
- Points
- Rental payments
- Repairs
- Taxes
- Vacancies
- Utilities
In general, your rental expenses can be subtracted from your rental income. When you use your property for personal reasons on occasion, you must divide it between rental and personal use. If you own a portion of a property, you can deduct expenses based on your percentage of ownership.
