What is the motivation for doing something? People are going to either move on toward bigger and better things or they are moving away something that causes them pain. In our lives, real estate is about money coming in and money going out. The money coming in is always fantastic, and the money going out is expected. However, what isn’t expected is when there are hidden costs that go along with multifamily investing.
We’re going to discuss the differences between real and hidden costs of real estate. Operating expenses are any kind of expenses that are necessary to keep the property maintained. This include:
- Pest Control
- Utilities like garbage collection, water, electricity, and gas)
- General repairs and maintenance
- Property taxes
- Management Fees
- Marketing and advertisement fees
- Office expenses
With all of these things that multifamily investors have to pay attention to, here are five hidden expenses that don’t even register on their radar until it’s too late.
1. Horrible Employees
Whether they are lazy, incompetent, or they are engaging in criminal activity, these employees can be a massive drain on your resources. They could be stealing from you, not providing adequate services, and so much more. But, other than money, they are a drain on your energy and your attitude. Instead of “hoping” they’ll get better after you talk to them, the first instance they show disrespect to you and your business, it’s time you sever ties and go your separate ways.
When multifamily investors want to appeal to their tenants, they’ll add multiple amenities that sweets the deal, if you will. These amenities like a pool, fitness center, community hangout and the like, are appealing to tenants even though they are paying higher rents for them. For the multifamily investor, there are a lot of costs associated with these additional amenities. Things like insurance, maintenance, and staffing can add up pretty quickly.
3. Apartment Turnover
When a family moves out of an apartment, you have to pay money to fix it up for the next tenant.Every month there is an apartment empty, you’re losing money. So, in essence, a multifamily investor is losing twice with empty apartments.
4. Capital Expenses
Fixing an HVAC, repairing the roof, taking care of a bug problem are all scenarios that landlord will have to deal with on a regular basis. These things add up, and when you have a bunch of properties to manage, it can get pretty costly.
5. Raising Invoices
Maybe you’ve been with a landscaping company for a while and then one day you open your bill, and it is $100 more than it has been in the past. When businesses get comfortable with a client, and they’ve been working together for a while, they’ll increase their prices. You would think that it would be the other way around because you’ve been a loyal client, but… Nope. It doesn’t work that way, and you’re the one left with the higher bill.