What percentage of rent goes to expenses?

On average, 40-50% of gross rent goes to operating expenses over time. This includes taxes, insurance, maintenance, vacancy, and management. Some years are lower, some years a major repair pushes it higher. Budget conservatively at 50%.

What is the biggest expense for rental property?

Property taxes are typically the largest single expense, followed by insurance and maintenance. In high-tax states like Texas and Ohio, taxes alone can consume 15-20% of gross rent. In low-tax states, insurance or maintenance may be the largest line item.

Should I include mortgage in operating expenses?

No. Operating expenses do not include mortgage payments. Your mortgage payment is debt service, which is separate. NOI (Net Operating Income) is calculated before mortgage payments. Cash flow is calculated after mortgage payments.

Rental Property Expenses Breakdown

Every expense you need to budget for as a rental property owner — with realistic percentages and dollar amounts.

Updated March 2026|By becvio Research

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The 50% Rule

A common rule of thumb is that 50% of gross rental income goes to operating expenses over the long run. If you collect $1,500/month in rent, budget $750/month for expenses. This sounds high, but it accounts for everything: taxes, insurance, maintenance, vacancy, management, and capital expenditures. Some years you spend less, some years a major repair hits. Over time, 40-50% is realistic for most residential rentals.

Property Taxes

Property taxes are typically the largest single expense for rental properties. Rates vary dramatically by location: Texas and Ohio often charge 1.5-2.5% of assessed value, while Hawaii and Alabama may be under 0.5%. On a $150,000 property, taxes could range from $750 to $3,750 per year depending on location. Always verify the actual tax amount with the county assessor rather than relying on listing estimates.

Insurance

Landlord insurance (dwelling fire policy) typically costs 15-25% more than a homeowner policy. For a single family rental worth $150,000, expect $1,000-$2,000 per year. Factors affecting cost: location (flood zones and hurricane-prone areas cost much more), property age and condition, coverage limits, and deductible amount. Shop multiple carriers annually — rates vary significantly between providers.

Maintenance and Repairs

Budget 1% of property value per year for ongoing maintenance, or $100-$150 per unit per month. This covers: HVAC filters and servicing, plumbing repairs, appliance issues, paint touch-ups, and general wear and tear. Capital expenditures (roof, HVAC replacement, water heater) are separate and should be budgeted at an additional 5-10% of rent per month as a reserve.

Vacancy

Budget 5-8% of gross rent for vacancy. This covers the time between tenants plus any turnover costs (cleaning, minor repairs, listing fees). In strong rental markets with high demand, actual vacancy may be 2-3%. In weaker markets or with older properties, it could reach 10-15%. The best defense against vacancy is maintaining the property well and pricing rent competitively.

Property Management

Professional management typically costs 8-10% of collected rent plus a placement fee of 50-100% of one month rent for new tenants. Even if you self-manage, budget this amount because your time has value. If you ever want to scale beyond 5-10 properties or invest out of state, you will need professional management. Factor it into your analysis from the start.

Other Expenses

Additional expenses to budget for: landscaping and snow removal ($50-$150/month), utilities you pay as landlord (water, trash, common area electric for multifamily), HOA fees if applicable, legal fees for occasional evictions or lease reviews, accounting and tax preparation, landlord software subscriptions, and mileage to and from the property. These can add 5-10% of rent to your total expenses.