Kansas City rental properties are excellent investments. Even new investors know that owning rental property comes with expenses. Some of them are expected and others are surprises. When you’re renting out a home, you need to be prepared for the expenses that will cut into your cash flow and long-term ROI.
Working with a Kansas City property management company can help you plan for these costs.
Paying Taxes on Kansas City Investment Property
Rental income is taxable and if your income exceeds your expenses, be prepared to pay taxes. You can protect your financial security and assets by incorporating, but there are extra fees for that as well.
Look for tax deductions. The interest you pay on your mortgage is tax deductible, and you can also deduct any repairs you make on the property as well as the costs of professional fees you pay, such as property management.
Annual Seasonal Maintenance Expenses
Seasonal maintenance is important in Kansas City. Even if your tenants mow the yard and trim bushes, landlords are responsible for routine and ongoing lawn care. This might be a weed and seed program, which requires professional servicing.
Have your home professionally inspected annually. You can save money by taking care of small maintenance items early. You never want to wait until a tenant moves out before you inspect the property. Have the HVAC system inspected and serviced twice a year and get the roof, exterior, windows, plumbing, and basement checked at least every other year.
Budgeting for Rental Property Maintenance and Repairs
No one likes to pay for repairs, but remember that you have a long-term investment and those costs will be absorbed and more than paid for by the returns you ultimately earn. You want your renters to keep you informed about maintenance issues and report any problems right away. In addition to annual inspections, train your tenants to report small problems right away. Cosmetic issues can wait, but minor leaks can lead to major problems.
Update Your Insurance Policy
Change your homeowner’s insurance policy to landlord’s insurance. You’ll need comprehensive liability insurance for potential injuries and property damage. Require your renters to have and maintain renter’s insurance with liability protection as well.
Understanding Wear and Tear
Normal wear and tear is part of every tenancy. There are several expenses to prepare for and things you can do to minimize those costs, including:
- Expect to paint every three to four years, especially in high traffic areas.
- Require your renters to have the carpets professionally cleaned every year and before they move out.
- Look for drippy faucets, loose handles and hinges, deck steps and rails.
- Make sure all windows open easily and schedule gutter cleaning in the spring and fall.
- Require that tenants change furnace filters at least every three months.
- Wood rot is common in Kansas City and is easy to avoid if checked annually.
Evictions in Kansas City and Lease Violations
The best way to prevent evictions is to hire a Kansas City property manager with good screening practices. Even the best tenants can lose a job, get sick, or have a life-altering event that will require them to break the lease and move out.
Be prepared for the worst, and talk to your property manager about the threat of eviction and early move-outs. You need to be consistent with your tenants when it comes to enforcing the lease. If you allow them to be late with rent or miss a payment one month, you could be facing huge legal costs and time-consuming court visits.
We don’t recommend that you allow month-to-month leases. You will likely end up with a vacant property and no rent coming in. If your tenant wants to move out early, make sure your lease covers this contingency. A good property manager will find a new renter to minimize any loss of rent.
For professional Kansas City property management advice, please contact us at Key Partners Property Management. We’ve been serving the area for almost 20 years, and we’d be happy to serve as your resource.