Today, we are talking about whether a property in San Ramon will cash flow when you are renting it out. It’s important to remember that all properties can cash flow if there is sufficient equity in the house to cover your expenses. In some cases, homeowners may not be able to identify all the potential expenses that are involved when putting a house on the rental market and maintaining it over the term of a tenancy. We always recommend that you contact a property management company to discuss the typical expenses to plan for in a rental property. Some of the expenses involved in running a property will be tax deductible. Talk to your CPA or your tax consultant about which expenses you may be able to write off at the end of the tax year.
One expense many homeowners don’t always take into consideration is maintaining an adequate reserve account. A reserve account is money you save to cover items such as capital improvements, like replacing or repairing the roof on your rental property. Your reserve funds will also pay for emergency repairs such as a new water heater when the one in your rental property needs to be replaced. There are also expenses that arise from normal day to day wear and tear that you will want to pay for out of your reserve account. Some of these are also tax deductible, which will help you cash flow your property.
A misconception many property owners seem to have when they begin renting out a house is that their homeowner’s insurance policy will cover the repairs that are required to keep the house well maintained and running properly. This is not the case at all, and most expenses involved in keeping the house safe and habitable will be considered normal business expenses. They will always be the responsibility of the homeowner.
When you are analyzing your property to determine whether it will cash flow, remember that you have to consider all the potential monthly and annual expenses that are involved in maintaining a property, including that all important reserve account. If you have any questions about property management, or you would like to talk to someone about how to plan for the expenses that are sure to show up, please contact us at Windsor Pacific Property Management. We would be happy to help you.