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What Does It Cost to Own a Plymouth Rental Property?

Woman on Tablet Looking at Plymouth Property CostsBuying rental properties is one of the best ways for an investor in Plymouth to build wealth. But unlike other types of investments, there are often substantial starting costs. Procuring a Plymouth rental property is very capital-intensive. Albeit the right financing will help you defray some of the costs, you need to understand first what you are getting yourself into. The value of a rental property will vary from market to market, but there are several rental property costs that you can expect and prepare for no matter where it is.

The first thing people generally think about when thinking if they can afford to buy a rental property is the price of the home itself. And this is a perfect opportunity to start crunching the numbers. To figure out which markets you might want to explore, it is a good idea to take a look at the median listing price for properties in your chosen area. As an illustration, buying a rental property in New York City, New York, can easily run over a million dollars, while on the other side, the median home price in San Antonio, Texas, is less than $300,000. After analyzing the median house price in your market, you can get a better sense of which markets you might be able to afford.

While housing prices are a good place to start, it is significant to plan for many other rental property costs as a Plymouth investor. Some of the most important of these costs include:

  • Down Payment – Unless you’re paying cash for a property, it is important to have enough money on hand for a down payment. Many conventional mortgages expect to pay about 10% and 25% of the purchase price.
  • Closing Costs – The list of closing costs is long; it contains fees for everything from loan origination and attorney fees to appraisals, recording fees, and more. A good rule of thumb is to be prepared to pay between 2% and 5% of the purchase price.
  • Property Taxes – Though sometimes disregarded, property taxes are also an important item to include in your budget. Property taxes are assessed depending on the estimated value of the property. In some communities, you can seek information on property taxes online.
  • Repair and Maintenance Costs – Based on the condition your property is in when you acquire it, you will need to fix it up before it’s ready for your tenants. It would be a good idea if you were already preparing ongoing repair and maintenance costs, which are often around 5% of the property value annually.
  • Association Fees – If your property is subject to an Owner’s Association or other governing board, it is essential to factor monthly association fees into your total costs. These fees may be low-cost or pretty expensive; they rely on the type of amenities the community offers.
  • Property Management Fees – Numerous Plymouth investors decide to get a trusted property manager, like Real Property Management Associates, to monitor the day-to-day tasks involved in owning a rental property. If this is your target, bear in mind that you have to include the cost of the property manager’s fee in your budget. Depending on the organization you want to deal with, this fee could range anywhere from 8% to above 20%.
  • Ongoing Capital Expenditures – All rental properties will need capital improvements over the years, some bigger than others. So you have to be prepared for high costs, including a new roof or full window replacement, right from the start.
  • Future Vacancies – No investor buys a rental property expecting that it will sit empty for weeks or months, but it can, and this really happens anytime. That is why it is necessary to include the costs of an unexpected vacancy in your total ownership costs.
  • Cash Reserves – If buying that rental property will leave you flat broke, you probably can’t afford it. It is imperative to bear in mind that you need some cash in reserve after closing to avoid financial difficulties.

Though this list is by no means comprehensive, it does represent many of the major expenses. Some of these might be things like insurance, legal fees, utility costs, real estate agent commissions, etc. By ensuring you have all expenses accounted for, you can make smart investment decisions that will help safeguard the profitability of each rental property for years to come.

Would you like to know more about how to calculate rental property costs accurately? We can help! Contact us online or give us a call at 508-509-4485.

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