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Buying an Investment Property; 9 Profit Killing Hidden Costs

Aug 17, 2007
Hidden costs lurking in your project can make the difference between profit and loss. There's really no way to avoid hidden costs when you're buying an investment property, but you can estimate their impact. You probably won't face every single one of these on every project, but the following list of possible hidden costs should give you an idea what to expect.

Inspections. Inspections are essential on every project. A good home inspection will expose potential problems and give you clues to future repair costs. They could provide you with a powerful bargaining chip when you are entering final negotiations on the price of the property. Even if a professional inspection finds absolutely nothing wrong with the house, isn't that peace of mind worth the price of the inspection?

Surveys. A property survey could add to your costs if one is needed. When you are buying an investment property that hasn't been surveyed for ten years or more, you should get a new survey. If the boundaries are in question at all or if there have been major structural changes to the property, you should also opt for a new survey. In some cases, the lender may require a survey.

Certificate of Occupancy. A certificate of occupancy is a document that provides local government approval to occupy the structure. In some cases, you may be required to purchase a new one.

Title Insurance. You should buy title insurance any time you are buying an investment property. Title insurance protects you against any uncertainty about ownership or claims against the property.

Other Insurance. You will probably need some type of insurance, depending on what you're planning to do with your investment property. If you plan to live in it yourself, you will need homeowners insurance. You'll want landlord's insurance if you plan to rent to others. Rent loss coverage will insure you against situations where you might lose rental income (either if you can't find a tenant or the property becomes uninhabitable).

Utility Expenses. There may be extra utility expenses to pay, like fees to have utilities turned on or off, deposits for new connections, or other charges.

Repair Costs. Regardless of how well you plan for repair and renovation costs, there may be unexpected repair costs. Sometimes a repair will be more extensive than you thought, or it might be done incorrectly the first time.

Eviction Costs. If you're buying an investment property where existing occupants have not moved out, you may end up paying eviction costs. These could vary depending on whether the eviction is contested or not. Evictions will also have a cost in terms of time; even simple evictions can take a month to complete.

Unpaid Taxes. Unpaid taxes will be your responsibility. You may be presented with a bill for unpaid taxes if you are buying an investment property that is in pre-foreclosure.

When you're buying an investment property, hidden costs can rob you of your profits. But if you plan for these costs ahead of time, then you can accurately estimate your project costs and negotiate a favorable purchase price that maintains your profits.
About the Author
Discover exactly how Sal Vannutini combined two of the easiest (yet brutally powerful) real estate investing strategies and made an insane $31,510 Profit In Just 49 Days... And How You Can Do The Same! Visit http://www.FixerUpperFortunes.com
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