Tip of the Month - May 2010


Source: Real Estate by Laura Washington


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 sidewalks-fences-driveways, etc. 

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This web page was updated on 04/28/2010.