Earning passive income from renting out owned property is fun. Only from the rent paid by the tenant can you fulfill various living needs. However, don't forget the unexpected big expenses that arise when owning a rental property.
Owning a Rental Property, What Do You Need to Allocate Money or Budget for?
Can you guess what expenses you need to prepare money for? Keep reading until the end.
1. Maintenance
Of course, so that the property you rent is comfortable to live in, it must always be in good condition. Therefore, you must always provide a budget for maintenance costs, whether it is maintenance on a small scale (such as replacing a smoke detector) or large (such as repairing a roof).
So, what is the budget allocation for maintenance? To be safe, set aside 10% to 15% of the annual property rental fees you receive specifically for maintenance (reference: HSH).
2. Damage to property or equipment
Spending money to repair or replace damaged property or equipment can also be categorized as an unexpected big expense. Damage can be caused by various things. It could be because it is time for the equipment to no longer function, such as when we experience a broken AC or refrigerator in our own home. It could also be caused by the tenant's less careful behavior when occupying the property you are renting out.
3. Vacancies
Vacancies may occur and you must be prepared for them. Some tenants might rent for a whole year, some other might only rent for a few months. And, if you don't find a new tenant, there will be a vacancy.
As long as there is a vacancy, income doesn't come in but you have to spend money to pay utilities and maybe other expenses.
4. Taxes and insurance
Even though your property is rented to someone else, you are still responsible for paying the tax. For example, there is property tax that must be paid every year.
And, of course, don't forget insurance. Just as you insure the house you live in, it's a good idea to also insure the property you rent.
5. Legal fees
No less important are the costs you need to prepare for all legal-related matters. For example, rental agreements and what if there is a tenant who wants to stop renting your property midway or refuses to pay the remaining rental fee.
How to Prepare Funds to Pay for Unexpected Expenses When Owning a Property Rental Business
So that you don't have to worry later when you have to make payments for one, several or even all of the expenses above, here's how to prepare the funds starting now.
1. Open 1 bank account for 1 type of expense
Since there are several unexpected expenses, the best way to ensure the practicality of budget allocation and monitoring the use of money afterwards is to open several bank accounts. 1 account for 1 type of expense.
By having a Jago account, you can open multiple accounts without monthly admin fees in the Jago application. Choose to open Saving Pockets, Spending Pockets or both. For expenses that are not routine (for example, not paid every month), you can create Saving Pockets. Later, when the money has been collected and it's time to make a payment, you can change your Saving Pocket to a Spending Pocket.
Don't forget to personalize each Pocket to make it easier when budgeting.
2. Save or prepare funds hassle-free with an automatic saving feature
To make it hassle-free and more practical, you can also rely on the automatic budget allocation feature to the Saving Pocket with the Autosave feature. In the Jago application, select the Saving Pocket for which you want to activate the Autosave feature. Fill in the details as you wish and confirm. After that, you can see your savings grow by themselves.
3. Use an automatic or semi-automatic bill payment feature
Not only does it make it easier to allocate budgets or save money automatically, the Jago application also makes it easier for you to pay bills. You can schedule bill payments and recurring or routine transactions using the Plan Ahead feature. So, for example, tax and insurance payments can be scheduled.
You can also choose to have the payments run automatically according to the schedules you have set or semi-automatically. For semi-automatic payments, you will be asked to confirm on the day of the payments.
Apart from that, do you know that you can enjoy free quota for transfers to other banks from Bank Jago? The free transfer quota depends on your Account Level. The higher the Account Level, the more free quota for you.
