Maintenance Costs on a Rental: What to Budget
Money set aside each month for repairs. Older homes usually need more of this.
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Maintenance covers the routine, recurring repairs a rental needs: the leaking tap, the failed garbage disposal, the service call on the furnace. It is a separate budget line from a CapEx reserve, which is for major replacements.
What to budget
Common approaches, which roughly agree:
- 5% to 10% of gross rent. On US$1,450 a month, US$73 to US$145.
- The 1% rule of maintenance: about 1% of property value a year. On US$150,000, US$1,500 a year.
- US$1 per square foot per year as a rough floor on a property in reasonable condition.
The 50% rule is the blunter cousin: assume half of gross rent goes to all operating expenses combined, excluding the mortgage. Useful for a 10-second screen, too crude to underwrite on.
Age and condition change it a lot
| Property | Suggested budget |
|---|---|
| New build or recently renovated | 3% – 5% of rent |
| 20 – 40 years, well maintained | 5% – 8% |
| Pre-1960, original systems | 10% – 15% |
Older housing in cash-flow markets is exactly where this matters. A 1920s Midwest house at a 1.2% rent-to-price ratio can look superb until you budget maintenance honestly, at which point it may be no better than a newer house at 0.9%.
Other factors: galvanized or cast-iron plumbing, knob-and-tube wiring, and a roof past 15 years all raise the number. So does tenant quality, and so does distance: a manager dispatching a contractor you never chose will not optimize for your budget.
Why averaging matters
Maintenance is lumpy. Many years cost almost nothing; one year brings a US$2,800 sewer line. The percentage is a reserve to average that out, not a prediction for any single year. Setting it aside monthly in a separate account is what turns a crisis into an expense.
What it isn't
Not CapEx. A new roof is not maintenance. Not turnover costs, which belong with vacancy. Not improvements that add value, which are capital. Keeping them separate matters both for honest underwriting and for your tax treatment, where repairs and improvements are handled differently.
Related reading
The calculator includes maintenance and CapEx as separate defaults. Before buying, the property walkthrough checklist and working with an inspector cover establishing real condition.
Longer reads on this
Related terms
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