Investing in a rental property or renting a room in your home to travel nurses can be a lucrative opportunity. But just like any other business venture, there are expenses that come with creating and maintaining a desirable short term rental. Some of these expenses are easy to anticipate, but if you are a new landlord you don’t want to be caught surprised by some of the unexpected costs of being in charge of a rental property.
Landlords have to take on all the same responsibilities as other homeowners, but they are also obligated to provide a safe and functional home for their tenants. They can’t put off repairs till their next paycheck or cut corners. Here we will cover most of the expenses landlords encounter, both expected and unexpected.
Most landlords use a large portion of rent to cover the mortgage payment on the home. While you run less of a risk of having late rent payments by renting to traveling professionals, something could always come up. Be prepared to pay your mortgage in the event that your tenant is late on a payment or if you have a short lapse in occupancy.
As a short term rental landlord you need to be prepared to protect not only your property but yourself if there is an accident or injury on said property. Before securing your first tenant you will need to make sure you are carrying both property and liability insurance. The property insurance is to cover damages to your home or rental unit and the liability insurance will be to cover medical or legal expenses if someone were to get hurt on your property and seek payment for medical bills or treatment.
Insurance is most likely required by your local government or rental laws, but it also offers you peace of mind. Don’t get caught up in a legal battle or mounting bills that could have been easily offset by a proper insurance plan.
MAINTENANCE & REPAIRS
Even if your rental property is new and completely up to date, appliances can break, HVAC systems will need to be serviced, drains can become clogged and any number of repairs will need to be made. Whether you plan to maintain the property yourself or outsource the work to a handyman, you need to have money set aside for the cost of repairs at all times.
As a general rule of thumb, you should set aside 5 to 20% of the rent amount to go towards repairs and maintenance. For older homes, you may want to err on the side of caution and put away the full 20%. When you budget repair and maintenance costs, there are two types to consider:
Fixed Costs: These are the expenses that come up on a regular basis and that you can easily plan into your budget. For example, annual pest control visits, outdoor maintenance, and deep cleaning between tenants.
Variable Costs. While these costs are unpredictable, you can be proactive about setting aside money and preparing for the worst. Things may come up that have to be emergently fixed such as plumbing or toilet backups, broken heating and cooling systems, or appliances that break down. Most places have laws regarding how long a landlord has to fix things that are essential to living in a space such as the HVAC system or plumbing, so as soon as you get the call you will have to be prepared to spend the money to fix the problems ASAP.
If you are simply trying to make it on a month to month basis, these emergency issues could quickly become debilitating. You will want to make sure that you have some reserve funds in place, especially if you own more than one property. When problems arise at multiple properties at the same time, you don’t want to worry about how you are going to cover repairs.
With any rental you need to account for at least a few days of vacancies at the end of each lease term. Even if you have no major repairs to worry about, you will need at least a day after one tenant moves out to clean the space and wash any linens you provide.
Luckily if you are renting to travel nurses for three months at a time, you won’t necessarily need to repaint or replace carpet each time someone moves out like in a traditional rental. Assess after each move out and address any major maintenance issues on a case by case basis.
In the event that there are damages that have to be addressed, you can always keep a portion of the security deposit, but basic cleaning and maintenance should be a planned expense on your part. If you allow pets it is a good idea to deep clean any carpets and do a flea treatment to be safe. Some landlords charge a pet fee to account for this, while others budget for it when they price their rental.
To reduce vacancy expenses do your best to keep an open line of communication with your current rental. Be sure to ask for a 3-4 week notice if a tenant will be leaving so you have time to get your availability updated for anyone looking to move to the area. Travel nurses may not always know that far in advance if they will be staying for more than three months, but they can give you an idea if their hospital is talking about extending their contract or not.
For landlords who own more than one short term rental, it can become overwhelming to manage each individual space, time move in and move outs, and communicate with potential tenants. If you decide that all of these details are too much to keep up with, it may be worthwhile to hire a property manager to take care of these tasks for you.
A property manager handles the communication with the tenants and can also arrange for repairs and maintenance if you entrust these expenses to them. They usually charge a monthly fee depending on how in depth their job is. Your property manager would also be the person to provide video tours and information to travel nurses who find your listing on Furnished Finder and are requesting more details.
Hopefully, by choosing to narrow your tenant pool to traveling healthcare professionals and by having a solid vetting process you will avoid dealing with irresponsible or unreliable renters. However, there is always the possibility that you will have bad luck and need to go through the legal process of evicting a tenant.
In most cities, you will have to pay just to file an eviction and you will need to hire a lawyer to handle each case. While the eviction goes through the court system, you still won’t be receiving rent. Luckily most travel nurses aren’t in one place long enough to make eviction an issue, but it is best to be prepared for the unlikely scenario. Have a basic understanding of the legal processes or research the best lawyers to contact if you need to take a drastic step like eviction.
TAXES & OTHER FEES
Depending on where you live, you may have to fill out various applications to register as a landlord and ensure that your property is up to code and safe for occupancy. Fortunately, these fees are typically minimal and the up-front cost should be made up fairly quickly.
It is also important to keep in mind that you will have to pay property taxes and taxes on rental income. I highly suggest talking to an accountant to get an idea of what to set aside for taxes each month. In addition you will want to keep track of expenses related to starting and maintaining your rental because some of these will be tax deductions.
All of this may seem like a lot of money to spend in order to become a travel nurse landlord, but many of these expenses are in case of emergencies and worst case scenarios. Keep a decent amount of cash on hand, and protect yourself and your property with insurance and you will likely be able to maintain your rental without incurring major costs. Plus, when you rent to travel nurses who are already being vetted by agencies and hospitals, your risk of these worst case scenarios drops significantly. As always, knowledge is power and by being prepared you should have a more positive, profitable experience as a travel nurse landlord.