Tip of the Month - May 2010
MAKING THE RENT
Source: Real Estate by Laura Washington
DON’T UNDERESTIMTE VARIABLE COSTS
Figuring in the potential expenses of
not having Tenants-or having Tenants who don’t pay-can mean the
difference between a profit and a loss. Those vacancy and
collection losses are grouped with other variable operating costs such
as maintenance, management fees and set-asides for capital
reserves. Want a good rule of thumb? To make sure
you’ll be able to cover your variable costs, says Arthur
Andersen’s Greg Derby, charge Tenants 20% to 35% more than you
are paying for mortgage principal, interest, taxes and insurance.
Any lower and you might end up in the red.
Tip from Crossett Real Estate Services
In planning potential monthly expenses, deduct 5% of your monthly rental income in a Reserve Fund.
Building up a Reserve Fund prepares you to plan for major updating
improvements: a new roof/new heating system: replacement of
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This web page was updated on 04/28/2010.