Investment Property Expenses

Recurring Operating Expenses

• Property taxes: in California, generally about 1 percent of assessed value plus voter-approved local bonds, with annual assessment increases capped under Proposition 13
• Insurance: landlord or rental property coverage, plus liability and possibly flood, earthquake, or wildfire coverage depending on the property
• HOA dues: monthly assessments plus the risk of special assessments
• Property management: typically a percentage of collected rent
• Utilities paid by the owner: water, sewer, trash, gas, or electricity where the lease says so
• Landscaping and exterior maintenance
• Pest control and other service contracts

Vacancy and Turnover Costs

No property rents 100 percent of the time. Budget a vacancy allowance, and remember turnover costs: marketing, cleaning, painting, small repairs, and lost rent between tenants. The rental property calculator includes vacancy in your operating expenses.

Maintenance, Repairs, and Capital Expenditures

Maintenance is the routine cost of keeping the property in shape; repairs are unexpected failures; capital expenditures are the big items like roofs, HVAC systems, and appliances that wear out on their own schedule. Owners should set aside reserves for all three. The capital expenditures guide explains how to plan for them.

One-Time Costs at Purchase

Beyond the down payment, plan for closing costs, lender fees, appraisal, inspections, title and escrow fees, and any initial improvements or repairs before the first tenant moves in. These count toward your total cash invested.

Why Expenses Decide the Deal

Two investors can look at the same property and reach different conclusions simply by using different expense assumptions. Be conservative: underestimate income, overestimate expenses, and stress-test the result. The rental stress test calculator shows how your cash flow holds up when assumptions worsen.