• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Facebook
  • Twitter
  • YouTube

Owner Login | Tenant Login | Get a quote: 323-255-9400 ext. 4

Los Angeles Property Management Group logo

Los Angeles Property Management Group

Property management in Los Angeles & the Valley, done right.

  • Residential
    • Services Provided
    • Single Family Residence
    • Luxury Property Management
    • Tenant Selection
    • Maintenance
    • Video Marketing Your Property
    • On-Site Managers
    • Agent Referral Program
  • Commercial
    • Services Provided
    • Maintenance
    • Agent Referral Program
  • Why Choose LAPMG
    • Mission Statement
    • Recent Reviews
    • Awards and Recognition
    • Why May 12th Matters
    • True Property Management Horror Stories
    • Video Resources
  • Articles
    • David Crown in Forbes
    • Q & A with CEO David Crown
    • LAPMG Talks
    • Case Studies
    • FAQ
    • Featured Article of the Month
    • Featured Elsewhere
    • Industry Blog
  • Areas Served
    • Burbank
    • Culver City
    • Glendale
    • Hawthorne
    • Inglewood
    • Los Angeles
    • North Hollywood
    • Pasadena
    • San Fernando Valley
    • Santa Monica
    • Sherman Oaks
    • Studio City
    • West Hollywood
  • Careers
  • Contact
    • Our Team
    • Portal Logins
    • Prospective Tenants
    • Employee of the Month
    • Privacy Policy

What’s the True Cost of Holding an Empty Property

December 7, 2021

What’s the True Cost of Holding an Empty Property

What’s the True Cost of Holding an Empty Property

Most investment properties can only generate income if you find tenants and rent out the property. Unfortunately, if your property is vacant, you can say goodbye to the stream of passive income. What’s even worse is that there will be additional costs that come just from owning the property. In this article, we will examine the true cost of holding an empty property.

Here is how an empty property can end up costing you money:

1.    Mortgage

Depending on how you have financed your investment property, you could be dealing with monthly mortgage payments. This cost can usually be alleviated by the income generated from rent. However, if the property is empty, you’ll have to pay for the mortgage out of your own pocket – which can end up costing you quite a lot of money each month. Sadly, there isn’t any easy way to get around these payments. Therefore, we recommend that you try to pay off your mortgage as soon as you can. Afterward, the money you make from the rent that comes in will be a profit since it won’t have to go towards paying off the mortgage loan.

Caption: Property tax is something homeowners have to pay every year.
Alt-tag: Papers and tax forms used to calculate the costs of tax for an empty home.

2.    Property tax

Regardless of whether you have a mortgage or if your property is paid off in full – you’ll still have property tax to deal with. By the simple virtue of owning a property, you’ll have the pleasure of paying property tax. Thankfully, there are a few ways you can try to reduce the total tax sum you have to pay. You can examine your property data to see if you have been paying excess tax and then curb the unnecessary fees.

3.    Property insurance

It’s always a good idea to get insurance for your home. Besides just protecting your property, insurance can also save you from worrying about what to do if there is damage to your home. This is especially important if you are holding an empty property. Empty homes are prime targets for thieves, vandals, and squatters. Fortunately, insurance can help protect you from any ensuing damage. However, for these very reasons, insurance companies also consider vacant properties to be high-risk assets. Sadly, this means that you are likely to face a higher insurance premium if your rental is empty for a prolonged period.

Caption: Home security systems can be a good investment, especially for empty homes.
Alt-tag: Home security system with a keypad.

4.    HOA fees

If the neighborhood your property is in has a Homeowners Association, you will need to pay a membership fee. These fees go towards the upkeep, maintenance, and improving the property and its surrounding area. Typically, the monthly payments range between $200 and $300 but can depend on the size and type of your property. The bad news is that you will have to pay the HOA fees regardless of whether your property is empty or rented out. Luckily, you could hire a property management company to deal with HOA fees for you. Expert property managers can reduce the HOA fees by running efficient maintenance and hiring less-expensive contractors.

5.    Maintenance costs

Realistically, not all properties will fall under an HOA, and even those which do – usually have additional maintenance costs. Typical maintenance costs for any home include:

  • Gardening. Even if the house itself doesn’t have a yard, there could still be associated landscaping expenses.
  • Cleaning. If you ever plan to rent the property out again, you can’t just leave it in a dusty and dirty condition.
  • Security. Investing in a security system could be a good idea if your property doesn’t have anyone living in it.
  • Repairs. Empty homes will still deteriorate over time and will need to be repaired to prevent further damage.

Caption: You should perform regular gardening, even on an empty property, before it starts to resemble a jungle.
Alt-tag: Lawnmower used to cut grass in the yard.

6.    Opportunity costs

In economics, opportunity costs represent any potential lost income. They are the benefits you can miss out on by taking or not taking a certain course of action. When trying to figure out the true cost of holding an empty property, you need to factor in the lost revenue that would come from your rental income.

Basically, after you calculate all of the other costs, you should add the amount of money you are missing out on by not collecting rent. Therefore, an empty investment property represents a double negative to your monthly income. For those unfamiliar with economics, opportunity costs represent a hidden expense they frequently forget to calculate.

What are your options?

Although empty properties are an expense that can eat away at your income every month, there are a few options for you to consider:

1.    Advertise the property

The best way to stop the money bleeding from an empty property is to get new tenants and rent it out again. You can partner with an agent or even find a website that deals in real estate and put the listing up yourself. Keep in mind that some websites will charge you for listing your property, so remember to set some money aside for your marketing budget.

2.    Hire a property management company

One of the many services an experienced property management company can offer you is finding tenants for your property. Instead of dealing with the problem of finding tenants, you can pass that task along to someone else.

3.    Relocate there

If you own several properties and are having a hard time renting out one of them, you can consider moving there and renting the other one out. For example, if you own properties in California and Florida, you could decide on a change of scenery. You can call movers to help organize an easy transfer to Florida and rent your California property. Besides alleviating the cost of an empty property, Florida also has a lower cost of living.

4.    Sell the property

If your investment isn’t paying off, you can sell the home and invest your money elsewhere to get a better ROI.

In conclusion

Now that we’ve gone through all of the expenses you could deal with if your investment property is vacant, you can try to figure out what kind of expenses you will be facing. When you add all of the factors together, you’ll get a clear picture of the true cost of holding an empty property and how much money you can expect to lose each month while the property remains vacant.

Meta description: If you have a vacant second home or investment property, you are losing money each month. Find out what’s the true cost of holding an empty property.

 

Filed Under: Projects, Property Management Education Tagged With: Family Rentals, Los Angeles, Los Angeles property management companies

Primary Sidebar

    PROPERTY OWNERS: CONTACT US FOR A FAST FREE QUOTE

    (This space is not for tenant contact. Check out our listing page.)








    Loading...

    Footer

    Award-winning management means:

    Best property management in Los Angeles - Our Awards

    • Maximum profits.
    • Responsive service.
    • Vacancies filled quickly.
    • Accurate understandable monthly reports.

    Proud Members of:

    AAGLA AOACA AIR Commercial Real Estate Association Member BOMA 2022 Member of Forbes Real Estate Council

    Contact Information

    
    

    YouTube LAPMG   Facebook LAPMG   Twitter LAPMG

    Los Angeles Property Management Group
    10960 Ventura Boulevard Second Floor
    Los Angeles, CA 91604
    Phone: 323-255-9400
    Contact Us

    Los Angeles Property Management Group is registered with the California Bureau of Real Estate License #01931033.
    Kyle Crown License #01936385
    David Crown License #01157354

    © 2023 Los Angeles Property Management Group · Privacy Policy
    10960 Ventura Boulevard Second Floor, Los Angeles, CA 91604 · Phone: (323) 255-9400
    LAPMG is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone and applying the relevant accessibility standards. If you have any issues, please contact dcrown@lapmg.com.