This Is How Much It Really Cost Me to Become a Landlord

published Aug 17, 2018
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(Image credit: fizkes)

In 2015, my grandmother became gravely ill. She was living with my parents, very close to the house my husband and I had purchased in 2005. Grandma needed full-time care, and since I had just made the transition to a stay-at-home mom, I was more than happy to venture to my parent’s house to help take care of her during the day. But a year later, my mom was required to move two hours north for her work. Since Grandma couldn’t make the move with my parents to their new place, my husband and I decided to take over their mortgage, move into their old house, take care of Grandma full-time, and rent out the home we had purchased just 10 years prior.

Just like that, my husband and I became landlords. We knew that there would be some upfront costs, but we were surprised by just how many there were.

Throughout the process, we tried to be as frugal as possible. For example, we considered working with a realtor to get everything set up, but we didn’t want to incur any additional costs. Realtors usually charge the equivalent of one month of rent, and since rental properties in our area were going for between $1,500 and $1,800 a month, it would have cost us that much at least. So we did it ourselves. But we quickly found that in transitioning the house to a rental, there were many other unexpected costs. And even when the tenants moved in, the costs kept coming.

When you are a homeowner, and something goes wrong, you can usually put a bandage on it while you do price comparisons and save. But when you have strangers living in your home, and paying you to do so, you don’t have that luxury.

Thinking of transitioning one of your properties to a rental? Here’s how much it cost me:

The (Real) Costs of Becoming a Landlord:

Before we could even list the house, we had to get it rental ready. Most of the repairs we made were purely cosmetic—spackling holes in the walls, touching up paint, new tile in the laundry room, and the like. All that little stuff adds up though, and from the jump, we were already $500 in the hole.

Total: -$500

While we were making all the little fixes, we found a crack in the carport’s support beam. A perk of being the daughter of a retired carpenter is being able to ask your dad for help. He fixed it for just the cost of the materials, another $2,000.

Total: -$2,500

We spent another $200 on mulch and plants. We pulled weeds and tended to the gardens for many hours. I even did the cartoon-ish “pull on a weed so hard that I went flying backwards when it finally came out” move no less than twice, so you can technically add my chiropractic bill to the growing pile of costs as well.

Total: -$2,700

The house was ready to be listed after about a month, and we put it up for free on a popular real estate site. Then we set up another free account with a company that worked directly with potential renters. They facilitated the application process and the background checks. The $30 price tag helped to weed out the people who weren’t sure they were interested and the ones that knew they wouldn’t qualify. We found the perfect tenants and downloaded a rental agreement template for $25 from a legal website. Once it was signed, we were quite literally in business.

Total: -$2,755

Our tenants moved in and things were relatively peaceful for awhile, but in the two years they’ve lived there, there have been two emergencies. The first was when the compressor on the boiler went, the second came not too long after when the main shut-off valve on the water line broke off. Both required immediate remediation and cost approximately $1,850.

Total: -$4,605

I also discovered that I no longer feel comfortable preparing my own tax returns. We’ve used a CPA since that first year. She’s $100 a year, but I can’t really complain about that being an added cost because she is a wizard and works out way more deductions than I ever did.

Total: -$4,805

We still have a mortgage on the place for around $1,200 a month, including taxes and homeowners insurance, so we pay that every month. Over two years, we’ve paid $28,000.

Total: -$33,605

Of course, our renters pay us every month, too. Right now, they’re paying $1,500, so we’ve collected $36,000 over the course of two years.

Total: +2,395

So yes, right now we’re still in the green—which is good because we definitely need cash on hand for quick repairs. But that number doesn’t reflect the other costs, too. The biggest and most unexpected cost of becoming a landlord is the emotional one. I worry a lot. I worry that something will happen at the house and someone will get hurt. I worry that there will be a fire, or one of the large trees in the front yard will fall causing extensive property damage. I worry that the renters will fall on hard times, and no longer be able to pay their rent, leaving me no choice but to evict them because my husband and I can’t afford two mortgages. I also worry about the day I will have to start all over again and find new renters. We truly lucked out with the ones we have found. I stress about the day that I once again must place my trust, and my largest asset, into a stranger’s hands.

We’ll continue to retain the property for as long as it makes sense to do so. Even through the costs and the emotional strain, the property is still gathering equity, which is almost more valuable than the payment we receive each month.