Life as a landlord may be tempting to homeowners unable to sell their homes and others looking to add properties to their investment portfolio.
However, many costs associated with rental properties catch novice landlords by surprise. The following are four hidden expenses experts say new landlords should consider.
1. Increased insurance costs
Rental homes may cost more to insure.
For example, homeowners who cannot sell their homes should be aware that renting out the home changes the owner’s status from primary occupant to “investor,” says Brian Mikelbank, an associate professor of urban studies at Cleveland State University, in Ohio.
As a result, it costs more money to insure the home with a special landlord insurance policy. According to the Insurance Information Institute, the premium is about 25 percent more than with typical homeowners insurance.
The tenant rent payment may help cover the increased expense, but Mikelbank says landlords shouldn’t always count on it.
“Homes will usually have tenants for less than 12 full months out of the year, since it takes time to find a renter, or a tenant could potentially leave before their lease is up,” he says.