Here we are on day two highlighting costs that are associated with real estate investing. We have been discussing some things that should be considered once the real estate comps have been researched, but before you make an offer. Today let’s take a look at two more costs in the real estate investing field, taxes and vacancy costs.
People frequently use the taxes from the year when they purchased the property, assuming the taxes will stay the same. Guys, taxes change every year. Taxes can go up drastically after a purchase. For example, an owner occupied property usually has tax breaks, so unless you intend to owner occupy too, your taxes will go up.
Also, the county appraisal that your taxes are based on could go up after your purchase. For example, if you buy a property for 100,000 but the tax appraisal last year was for 50,000, don’t count on it remaining at 50,000. The safest approach is to look at the tax rate and the purchase price to determine your future taxes.
For some reason people tend to forget to take into account vacancy rate. Even when looking to invest in a desirable rental area, it’s best to always take into account at least an 8-10% vacancy rate. It’s best to do some investigation, look at your market and find statistics on the average vacancy rate.
Taking these costs into account when looking at properties will help you to make wise business deals. Tomorrow we will take a look at tenant turnover costs as well as insurance costs as these are also important factors in buying investment properties.