Landlord Costs: What to Budget Every Year
Every year a landlord should budget for finance costs, insurance, repairs and maintenance, safety and compliance checks, letting or management fees, empty periods, property taxes or service charges, accounting, and tax on the profit. A sensible starting point is that running costs, before mortgage interest, take 25% to 40% of the rent. Then add a capital reserve for big items like boilers, roofs and kitchens.
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This is general information, not tax or legal advice. Landlord rules and fees change often; check the official guidance in your country before you let.
The annual landlord cost list
- Mortgage interest (and any fees on remortgaging).
- Landlord insurance: buildings and liability, and contents if furnished. Rent guarantee cover is optional.
- Repairs and maintenance: many landlords budget about 1% of the property value a year. Older homes need more.
- Capital reserve: money set aside for replacements, separate from day-to-day repairs.
- Letting and management fees: a percentage of rent, plus tenant-find fees.
- Voids: weeks with no tenant. Budget at least two to four weeks a year.
- Safety and compliance checks required by local law.
- Service charges, ground rent, HOA fees or society maintenance if the building has them.
- Property or council taxes where the owner pays.
- Utilities and bills you cover, especially in HMOs or when empty.
- Accounting and legal fees, including tenancy paperwork.
- Income tax on the profit.
Country notes
England. Annual gas safety check, electrical safety inspection at least every five years, a valid EPC, and the tenant's deposit protected in a government scheme. Mortgage interest gets only a basic-rate tax credit, not a full deduction. The Renters' Rights Act 2025 is changing tenancy rules and will bring a landlord database and ombudsman, which may carry fees; check GOV.UK for current dates and costs.
US. Property tax, insurance (higher in storm and flood zones), HOA fees, city rental licences in some places, and capital reserves for roofs and HVAC. Depreciation can reduce taxable rent; take local tax advice.
India. Property tax, society maintenance and sinking fund, brokerage when finding a tenant, and repairs. For income tax, rental income from house property gets a 30% standard deduction on the net annual value, plus deductible interest within limits.
Dubai. Annual service charges (usually paid by the owner), maintenance, agent fees for finding a tenant, Ejari tenancy registration, and insurance. Individuals holding property personally generally do not pay UAE income tax on rent, but your home country may tax it.
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Worked example (England, example numbers)
Flat worth £220,000, let at £1,200 a month (£14,400 a year), fully managed.
- Management at 12% + VAT: 14,400 x 14.4% = £2,074
- Landlord insurance: £350
- Gas safety check: £90
- Electrical inspection (£200 every 5 years): £40
- Repairs at 1% of value: £2,200
- Voids, two weeks (14,400 / 26): £554
Running costs before finance: £5,308, or about 37% of the rent.
Add mortgage interest. On a £165,000 loan at an example 5% interest-only, that is £8,250.
Profit before tax: 14,400 - 5,308 - 8,250 = £842 a year. And because only 20% of mortgage interest is given as a tax credit, a higher-rate taxpayer can owe tax that is larger than this small profit. Run the tax numbers before you buy.
Common mistakes
- Budgeting from the asking rent and assuming no voids.
- Treating the capital reserve as profit.
- Missing a compliance renewal date, which can bring fines or block an eviction.
- Forgetting leasehold costs like service charges and major works bills.
- Working out profit before tax and calling it income.
Red flags
- A deal that only works with zero voids and zero repairs.
- Rising service charges in the building's recent history.
- An old boiler, roof or wiring with no reserve set aside.
The full landlord section, plus landlord law and tax by country, is in Real Estate: Everything You Need to Know.
FAQ
What percentage of rent goes on costs?
Before mortgage interest, many landlords see 25% to 40%. Fully managed, older or leasehold properties sit at the top end.
How much should I keep as an emergency fund?
Many landlords keep three to six months of rent per property in cash. Keep more for older buildings.
Are landlord costs tax deductible?
Most running costs are, within each country's rules. Finance costs and capital improvements have special rules. Check with an accountant.
More playbooks on other topics: https://www.asendify.co/books/
Everything You Need to Know. £1450.00 one-time, instant download.