What other costs can be added?

[Nik Frid]

What other costs can be added here that an investor faces, and for which there is not always enough capital

property management fees?
maintenance?
insurance?
property taxes?
utilities?
recurring expenses?

[Shawn Parsh]

Nik,

I'm not sure I understand the question, but if I'm on the right track I would say that unknown issues. I have done a lot of rehabs over the years and sometimes in the middle of a rehab we find something that needs fixed that we didn't know about. I know there are a lot of people, investors included, that will find something wrong with a property but cover it up instead of fix it. I don't operate that way. 

Over the years we have seen some crazy things, like plumbing pipes sealed with glue and duct tape to stop a water leak. A lot of times we find surprises when we are tearing out walls to change a properties layout. I always try to build in enough profit so that when we find unexpected issues we can make the needed repairs and still be profitable. I say unexpected, but I normally expect that we will find something on each house we do. 

Another example would be a sublease on a property that the title search and insurance didn't catch. I once bought a school from the county board in which there were no disclosed leases on the property only to find out later that they failed to disclose an internet company was leasing a small shed (probably 4' x 6') on the property. I bought the property on one day and sold it the next. It wasn't until the new owner observed the internet provider walking through the school property that they learned about the lease. 

The new owner called me and said they regretted having to involve me, but they had to sue me to go after the school board. As a result I paid several thousand in attorney fees to basically act as the middle man between the new owner and the school board that sold the property. My title insurance company didn't pay anything to start because they said the lease with the internet company was not listed at the court house. After it was all done my title insurance company sent me a check for my attorney fees.