What Expense Do New Landlords Underestimate Most?

General Landlording & Rental Properties

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What Expense Do New Landlords Underestimate Most?

Linda Murray

Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes

For experienced landlords:

What expense surprised you most when you first started?

Maintenance?

Vacancy?

CapEx?

Property management?

Insurance?

Something else?

Would love to hear the expenses newer investors should be building into their numbers from day one.

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Kyle MccawBusiness Member

Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes

@Linda Murray

For me, it’s not one expense — it’s underestimating how many little expenses eventually become big expenses.

New investors tend to model the mortgage, taxes, insurance, management, and maybe a maintenance percentage. Then reality shows up. A turnover needs paint, cleaning, a few blinds, some landscaping, a lock change and a handful of repairs. An HVAC system dies. A sewer line backs up. A tenant moves out unexpectedly and you lose a month of rent while spending money getting the house ready again.

If I had to pick one, though, I’d say turnover/vacancy. People often calculate vacancy as simply “one month without rent.” It’s really lost rent + utilities + make-ready + leasing costs + the repairs you discover once the tenant is gone. That combination can hurt.

I’d also tell new investors not to confuse cash flow with profit. Real estate works in several ways: cash flow, appreciation, principal paydown and depreciation/tax benefits. You absolutely need adequate reserves and realistic expenses, but a property that doesn’t throw off huge cash flow every month isn’t necessarily a bad investment.

Underwrite conservatively, keep reserves, and think in decades — not months.

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Kyle MccawBusiness Member
Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes
2w
@Linda Murray
For me, it’s not one expense — it’s underestimating how many little expenses eventually become big expenses.

New investors tend to model the mortgage, taxes, insurance, management, and maybe a maintenance percentage. Then reality shows up. A turnover needs paint, cleaning, a few blinds, some landscaping, a lock change and a handful of repairs. An HVAC system dies. A sewer line backs up. A tenant moves out unexpectedly and you lose a month of rent while spending money getting the house ready again.

If I had to pick one, though, I’d say turnover/vacancy. People often calculate vacancy as simply “one month without rent.” It’s really lost rent + utilities + make-ready + leasing costs + the repairs you discover once the tenant is gone. That combination can hurt.

I’d also tell new investors not to confuse cash flow with profit. Real estate works in several ways: cash flow, appreciation, principal paydown and depreciation/tax benefits. You absolutely need adequate reserves and realistic expenses, but a property that doesn’t throw off huge cash flow every month isn’t necessarily a bad investment.

Underwrite conservatively, keep reserves, and think in decades — not months.
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- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  Well said. Turnover is a great example of how several “small” costs can quickly become a significant hit. Conservative underwriting and healthy reserves really do make a difference.
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Jim Johnson
Real Estate Agent · Memphis · Member since 2026 · 538 posts · 311 votes
2w
CapEx is the one I'd make sure new landlords don't overlook. Repairs are easier to account for because you're dealing with them as they happen, but a roof, HVAC, water heater, or other major replacement can go years without costing you anything and then hit all at once. I'd rather treat those systems as expenses that are slowly building in the background and reserve for them along the way, even when everything is working fine.
1 Reply
- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  Yes! CapEx can be easy to overlook when everything is working, but those major replacements can hit hard when they finally come due. Building reserves along the way is a smart approach.
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Adam BartomeoBusiness Member
Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
2w
It is slightly underestimating several expenses and not accounting for some expenses during the due diligence period. It is rare that one big expense wasn't accounted for.
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- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  That’s a great point. Due diligence can uncover expenses that don’t always show up in the initial numbers. It’s better to identify those early and build them into the deal.
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Michele FischerPro Member
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
2w
I think it is normal for people to budget that 3-4% of rent will be uncollectable, but I'm seeing 8%. Having units occupied but not paying rent is not something I was well prepared for, and it has gotten so much worse since the pandemic.
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- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  That’s a big one. Occupancy can look healthy on paper while actual collections tell a very different story. Definitely something investors need to account for realistically.
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Johnathan Cotcher
Member since 2026 · 4 posts · 1 vote
1w
The one that got me was the slow bleed of small stuff, not one big line item. Turnover costs (paint, cleaning, a lock change, a few odds and ends) are individually small enough that you don't budget for them, but they hit every single vacancy, and they add up to real money over a year of normal turnover.
The other one I underestimated was how many little recurring costs don't have an obvious home in your budget: a screening fee you ate for one applicant, a subscription, the portion of your phone bill that's actually rental business. None of them are big enough on their own to notice, but by the time you're doing taxes in April you've forgotten most of them happened, and that's real deductible expense you're not claiming, not just money you spent.
What's helped me most is logging things the week they happen instead of trying to reconstruct the year later. A five-second note when you buy something is a lot more reliable than your memory in March.
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- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  Exactly. The small recurring costs can really add up over time. I like your approach of logging them as they happen rather than trying to remember everything later.
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Patrick O'SullivanBusiness Member
Property Manager · Phoenix, AZ · Member since 2024 · 521 posts · 193 votes
1w
One expense I think gets underestimated is the timing of expenses.

A property can look great when you average everything over 12 months, but expenses rarely arrive evenly. You might have a turnover, HVAC repair, insurance bill, and a vacancy all within a couple of months. Meanwhile, the mortgage and other fixed expenses keep coming regardless of whether rent does.

That’s why I think reserves are just as important as accurately estimating the individual expense categories. You can have a profitable rental on paper and still get into trouble if several perfectly normal expenses happen at the same time.

I'd also budget differently based on the age and condition of the property rather than using the same maintenance/CapEx percentage for everything. A newer roof and HVAC should have a very different near-term reserve requirement than systems already approaching the end of their useful lives.

For a new landlord, I’d rather see slightly too much cash sitting in reserves for the first few years than have every dollar invested and discover what “average annual expenses” actually look like in real life.
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2 Reply
- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  Absolutely. The timing of expenses can be just as important as the annual totals. Strong reserves give landlords much more breathing room when several unexpected costs hit at once.
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Lindsay DavisBusiness Member
Real Estate Broker · Birmingham, AL · Member since 2019 · 322 posts · 200 votes
1w
I don’t know that new landlords underestimate one single expense as much as they underestimate how expenses stack. A repair by itself may not be a big deal. A vacancy by itself may not be a big deal. A turn, a few maintenance items, higher insurance, and a slower leasing period all landing close together is where it starts to feel different.

That’s usually the part people are not prepared for. I’d rather see someone buy a little slower with stronger reserves than buy a deal that only feels good when everything behaves.
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- Linda Murray
  OP
  Real Estate Broker · Frankfort, KY · Member since 2019 · 99 posts · 28 votes
  5d
  Yes. It’s often the stacking of several normal expenses that catches investors off guard. Strong reserves can make a huge difference when the numbers don’t go according to plan.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5d
all of it.. but a biggee to class D and C investors is shrinkage IE stuff stolen out of your home !!!! condenser stolen wire stolen Hvac stolen appliances stolen water heater stolen.. crack head takes 10 inchs of the cooper and cost you a few grand.. there is no way to establish totally accurate budgets you can put in plug numbers and if you do better great but if you run over well its just what it is.
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Leo SteinBusiness Member
Property Manager · Orange County, CA · Member since 2025 · 13 posts · 1 vote
5d
The one that caught me off guard was the cost of vacancy and turnover as a combined event. It isn’t just lost rent; it’s utilities, cleaning, paint and patching, rekeying, disposal, leasing time, and the chance that a small repair becomes a bigger one while the unit sits empty. I’d underwrite a realistic make-ready line and a cash reserve for major systems separately from routine maintenance. For older homes, price insurance, permits, and compliance work from actual local quotes rather than a generic percentage. A simple turn checklist with dates and photos helps keep the budget honest.
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Rachid AbadliBusiness Member
Investor · Sacramento, CA · Member since 2024 · 125 posts · 33 votes
4d
Software and administrative costs. Everyone budgets for CapEx, vacancy, and insurance — but nobody talks about the $50–200/month they end up spending on tools:
- PM platform: $12–50/month
- E-signing (DocuSign/HelloSign): $15–25/month
- Screening: $25–40 per application
- Accounting software: $15–30/month
On a single rental that might be $100–150/month — which on a $1,500/month rent property is 7–10% of gross. That's PM-fee territory without having a PM.
The good news: there are free all-in-one platforms now that bundle leases, e-signing, rent collection, screening, and maintenance tracking. Do your research before committing to paid tools — the market has changed a lot in the last year.
But the bigger underestimated expense that everyone above nailed: turnover timing. Kyle's right — it's not just lost rent. It's utilities you're paying on an empty unit + make-ready costs (paint, cleaning, lock change) + leasing costs + the surprise repairs you discover once the tenant is out and you can actually see the walls behind the furniture.
Budget 1.5x your monthly rent for every turnover, not just one month's vacancy allowance.
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Victor Garcia
Member since 2026 · 2 posts · 0 votes
4d
Maintenance
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Alan Van Antwerp
Investor · El Cajon, CA · Member since 2016 · 1 post · 0 votes
16h
Water and the gas/electricity to heat is my number one expense every month on average.
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