Rental Property Budget: How Much to Reserve for Repairs and Vacancy
By LandlordShark Editorial Team · Published · Last reviewed November 1, 2026
General information, not legal advice
Landlord-tenant rules differ by state and city. Check your local statutes or talk to a licensed attorney before acting. Full disclaimer.Many new landlords look at rent minus mortgage and call the rest profit. Then a water heater dies, a tenant leaves, and the cash disappears. A real budget counts the costs that come irregularly but always come.
Start with income
Use realistic rent, not the best case. Then subtract expected vacancy and turnover loss: the months a unit sits empty plus cleaning, marketing, and screening. Even stable properties turn over eventually.
List fixed costs
- Mortgage principal and interest
- Property taxes
- Landlord insurance
- HOA dues, if any
- Property management fees, if you use a manager
- Utilities you pay
- Lawn, snow, or trash services you provide
These are predictable, so put them in first.
Add variable costs
- Routine maintenance and repairs. Faucets, locks, small fixes, and turnover paint.
- Capital expenditures (CapEx). Big items that wear out: roof, HVAC, water heater, flooring, appliances, siding.
- Professional fees. Tax preparer, attorney, accounting software.
- Advertising and screening.
Rules of thumb (use with caution)
Investors use shortcuts to sanity-check a deal. They are rough guides, not guarantees, and your property may differ a lot.
| Rule | What it says | Limits |
|---|---|---|
| Maintenance reserve | Set aside a percentage of rent each month, often cited in the range of 5% to 15% | Older buildings need more |
| Vacancy allowance | Budget a percentage of rent for empty periods, often 5% to 10% | Varies by market |
| CapEx reserve | Save monthly toward big replacements based on their age and cost | Depends on what is already worn |
| The 50% rule | Operating expenses (not the mortgage) often run about half of rent | A crude estimate only |
The right numbers come from your own history. Track every expense and adjust.
Build a CapEx schedule
List each major system, its age, and its expected remaining life. Estimate replacement cost, divide by remaining years, and add up the monthly amounts. This shows what you should be saving, even if you cannot yet.
Keep an emergency fund
A cushion of several months of expenses per property protects you from vacancies, big repairs, and slow payers. Many landlords keep it in a separate savings account.
Measure what matters
- Net operating income (NOI): rent minus operating expenses, before the mortgage. See rental cash flow and cap rate for a worked example.
- Cash flow: NOI minus mortgage payments. If your NOI does not already include a CapEx reserve, subtract one too so the number is realistic.
- Cash-on-cash return: annual cash flow divided by the cash you invested.
Track these each year, and compare properties fairly.
Pro tip
Open a separate bank account for each property or for the whole portfolio. It makes the numbers visible and simplifies record-keeping and taxes.Revisit annually
Insurance, taxes, and repair costs change. Review the budget every year, and when you raise rent, compare with your costs. Our guide to raising rent can help. Pair the budget with a preventive maintenance plan to keep surprises small.