I would like to buy some investment property for a number of reasons. And this property doesn't even have to come with a structure on it, as I wouldn't mind just having the land. However, whether there is a structure upon the property or not, there are still extra costs involved. While I like to plan and consider how I would use my property, and how it might even earn me some extra income, there are some extra costs to consider in an investment property as well.
The property taxes that come along with a piece of investment property can have the costs of maintaining and retaining that property adding up over the years. A second property will often come with higher property taxes since a property exemption might not be allowed, and even just owning a barren piece of land will likely result in the property still being taxed to some extent. And those property taxes will be there each and every year whether I'm making any money from or even utilizing my investment property or not.
You just never know what could happen with a piece of property. Even trespassers on a vacant piece of land can end up hurting themselves somehow and leave me having to cover medical bills or worse.
Therefore, having insurance on a property is another aspect of owning land or an investment property. Whether I have to insure a structure and its contents or just have to have liability coverage on a parcel of land, insurance costs could add several hundred dollars or more each year to the costs of carrying such a property. And again, like property taxes, the insurance costs will be there each and every year whether I'm personally utilizing the property for any income generating purpose or not.
Upkeep and Utilities
Then there are the upkeep and utility factors to consider with a second property. With a home, there can be things like painting, lawn care, and general repairs and maintenance that come with the upkeep of the structure. But even with just raw land, there could be costs relating to maintaining the property such as building or maintaining fences, cutting grass or mowing hay, cutting or clearing trees, building or maintaining a road or driveway, and similar costs.
And when it comes to utilities, I could have to pay to maintain services whether or not I'm using them regularly. With an investment property that has a structure on it, while I could keep costs down by avoiding things like a phone line or cable and internet charges, it might still add several hundred dollars a year for heating and cooling costs to keep the property maintained and protected against things like humidity, mold, moisture, and deep freezes. And with a piece of land, I might have to pay to run utility lines to the property should I want them for future use.
Finally, there is the consideration of travel costs to get back and forth between a second property. Even if I'm not visiting the property regularly, if its location is outside our regular living area, I could be paying for gas to and from the area multiple times each year or more. Even if the property is just 100 miles away, making a trip there and back would result in 200 miles traveled, which could be 10 gallons of gas or more, which could easily equate to $40 at current prices. Making several such trips each year could add another $200 or more to the price of owning a second property.
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The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Real Estate
- Property Taxes