Cynthia Crofoot Rignanese, Esquire
Thinking Globally, Practicing Locally in Central Florida Since 1990

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Rental Property Costs More Than Just a Mortgage

Many people consider relocating to a warmer part of the country throughout the year. This makes Florida a perfect place to own rental property. When those people begin looking for a place to rent, you want to be ready.

You may already be looking at affordable properties or watching for foreclosure bargains to turn into a rental unit. Perhaps you have been saving for a down payment, cleaning up your credit report and constructing a budget around a potential mortgage payment. However, there are other expenses to keep in mind besides the bank loan.

Interest, Taxes and Utilities
If you own a home, you probably shopped for the best interest rate on a mortgage. However, because banks consider rentals riskier investments than primary residences, interest on a rental mortgage may be about 1.5 percent more than what you pay for your home loan. If you are saving for a down payment on a rental, be prepared to pay considerably more than what you put down for your home. Of course, if your credit score is below 720, your down payment may be even higher.

Many people are lured to Florida because of the relatively low cost of living and no income tax. Nevertheless, property taxes in Florida often make up for that. You want to get your money's worth by knowing what municipal services those taxes provide, such as trash removal and utilities.

Utilities like water and sewer may be included in the rent you set. You can get estimates from the utility companies when deciding what to charge your tenants. Utilities like gas and electric may be left entirely to the tenants to pay.

Some Costs You May Not Have Considered
Your budget should include every possible contingency. Be sure to remember to make allowances for things like:
· Association fees: The property you purchase may include a monthly fee for special services.
· Tenant search: Hiring someone to vet potential tenants may be costly. You may consider charging potential tenants an application fee to cover this expense.
· Vacancies: Advisors recommend assuming your property will be vacant two months a year. This may be added in when figuring what to charge for rent.

Rignanese & Associates is available to work with clients on their real estate needs. Please reach out to us at our new headquarters at 203 Avenue A, NW, Suite, 101, Winter Haven, Florida 33881 at 863.294.1114.

On behalf of Kelly Kennedy of J. Kelly Kennedy, Attorney/CPA, P.L.L.C; J. Kelly Kennedy, Attorney/CPA, P.L.L.C. has merged with Rignanese & Associates, PLLC.    

Cynthia Rignanese