We often hear about sky-high rent in many urban areas. But what happens to that monthly payment?
While some renters assume it simply lines the pockets of avaricious property owners, we wanted to learn the reality — so we interviewed seven landlords to hear their perspective.
“People love to demonize landlords for some reason, but landlords shoulder far more costs and hassles than most realize,” said Brian Davis, a property investor with 15 rentals and co-founder of the real estate blog SparkRental.
Mark Ferguson, realtor, investor and author who owns 14 rental units in Colorado, echoed that sentiment: “Although some may find rents outrageous, keep in mind the owner must absorb many more expenses than most people expect — often even more than other landlords forecast.”
Below are the main costs landlords cited when we asked where that substantial rent check they receive each month goes.
Additionally, we include two real landlords’ monthly expense breakdowns so you can see the actual figures — useful whether you’re paying rent or considering buying a rental property yourself.
1. Mortgage
If the landlord still carries a mortgage on the property — as many do — a significant portion of your rent goes straight to the lender to cover principal and interest.
2. Utilities
Some owners include utilities in the rent, but even those who don’t may still find themselves footing certain utility bills.
“When units are occupied, my tenants pay for electric, gas, water, TV, phone and internet,” said Andy Panko, who owns two one-bedroom condos in Woodbridge, New Jersey.
”When a unit is unoccupied, however, electricity, gas and water still need to remain on. I have to place those services in my name during vacancies.”
3. Insurance
Landlords must maintain landlord insurance to protect the physical asset against accidents and sudden losses like fire or severe weather.
They also need liability coverage to protect their finances if someone sues them after, say, slipping on an icy entryway.
4. Maintenance and Repairs
Whether it’s time and money spent fixing things personally or hiring contractors, maintenance and repairs are major expenditures for property owners.
“Many landlords should expect 5 to 20% of collected rents to go toward maintenance,” Ferguson says.
Kaycee Wegener of Rentec Direct separates these into two categories:
1. fixed costs you can anticipate in advance, such as routine upkeep like cleaning, trash removal and pest control, plus seasonal tasks like lawn care, snow clearing and gutter maintenance
2. variable costs that you can try to plan for but which may still surprise you, including appliance repairs or replacements, damage from neglect or normal wear, and emergency fixes.
“Many renters don’t grasp how expensive proper property upkeep is until they own one,” said Deb Tomaro, Broker Associate with RE/MAX Acclaimed Properties.
“A tree removal can run $1,200. A roof may be $8,000. A new refrigerator could be $800. A responsible landlord keeps reserves to address emergencies quickly and limit tenant inconvenience. Owners who are financially stretched each month may never build that safety net.”
Even with savings, a rough year can be punishing.
Nick Bowman, a Colorado landlord for 15 years, has seen costly surprises like “a sudden sewer-line replacement for $6K” and “tenants abandoning the unit before Christmas and leaving the heat off so the pipes freeze. Those nightmares can really deplete reserve funds.”
5. Staying Up to Code
Owners are required to keep their properties safe and habitable, and those compliance-related costs add up. These can include rental licenses, mandatory inspections and yearly registration fees.
“In Baltimore, where most of my units are,” Davis said, “I must register and pay annual fees to both the State of Maryland and Baltimore City. I need a lead-paint inspection between tenancies. I’d like to sell some units, but potential buyers don’t want them unless I’ve over-upgraded to meet the regulations.”
James Richards, a broker with Hot Market Realty in Minneapolis, shared a similar frustration:
I’ve been cited by the city for not having enough blades of grass per square inch. (Yes, they actually send an inspector for that.) Any home built before 1978 must pass a lead clearance test for new tenants, even if it cleared one before. Tests cost $300–$500, and remediation to pass can be $3,000–$5,000 or more if windows need replacement.
Richards also notes landlords can be fined for tenant misconduct: littering, overusing city services, mis-sorting trash, expired tags, failing to mow the lawn or shovel sidewalks, and so on. “The landlord’s fine is often larger than the tenant’s.”
6. Taxes and Fees
Beyond property taxes, owners pay income tax on the rental earnings.
While some deductions are available, claiming them can carry their own costs (see the next section).
7. Bookkeeping and Accounting
“Rental properties bring bookkeeping and accounting headaches,” Davis said, “which cost both time and money. I hire a bookkeeper and accountant for roughly $4,000 a year, and I still spend 30–40 hours annually on my own tax work.”
8. Property Manager Fees
Time is valuable, so many landlords outsource daily management to a property manager.
These services commonly cost between 8 and 12% of the monthly rent, according to All Property Management.
9. Tenant Turnover and Vacancies
When tenants move out, new expenses arise.
“Vacancies are a major cost,” Davis said, “especially in weak markets. Owners must cover mortgage payments without rental income and usually repaint and replace carpets. Renters have little incentive to treat walls or flooring gently, and it’s often difficult to recoup those costs from security deposits.”
“Most owners budget 5 to 15% of rent for vacancies,” Ferguson notes.
10. Marketing
To fill vacancies, landlords pay for things like credit checks, professional photos for listings and advertising.
“I handle my own advertising and tenant screening,” Panko says. “You can outsource this to an agent, but they typically charge a fee equal to one month’s rent every time they place a tenant.”
11. Legal Fees
“Hopefully landlords and tenants cooperate and respect one another,” Panko says, “but if issues arise you may need legal counsel to understand your rights and remedies under your lease and state law. In the worst case, you may need to evict a tenant, which is time-consuming and costly.”
Richards confirms this. “Filing for eviction costs $340 just for the filing fee, and you often retain an attorney for $400–$500 per eviction,” he said.
“Many evictions result in the tenant getting representation from a government-funded lawyer, which prolongs the process (lost rent) and increases legal costs since hearings are required. I’ve spent up to $1,500 on an eviction.”
He adds that records can be expunged by such free defenders, undermining future background checks.
Davis described similar struggles: “[In] any month I often have several tenants who miss rent. Then I must serve notices, file motions, pay court fees and wait months for a hearing — all while still paying the mortgage and receiving no rental income.”
Breaking Down the Numbers
So what does this look like month to month?
Ferguson offered this example of typical expenses for a suburban Colorado unit renting for $1,500 a month:
- Mortgage payment: $750 per month
- Taxes: $100 to $500 per month
- Insurance: $50 to $150 per month
- HOA fees: up to $500 per month (for condos in an association)
- Maintenance: $75 to $300 per month
- Vacancies: $75 to $225 per month
“When you add these costs together,” Ferguson summarizes, “monthly expenses total $1,050–$2,425 for a $1,500 monthly rent.”
Richards shared the breakdown for one of his Minneapolis properties:
- Property taxes: $300 per month
- Rental license: $100 per month
- Furnace certification: $25 per month
- Insurance: $100 per month
- Fines/inspection compliance/city costs budget: $200 per month
“I collect $1,250/month on this property,” he says. “After the above expenses, I’m left with $525 to cover mortgage, maintenance, turnovers, etc. Meanwhile, the government takes roughly $400 per month and drives up many of my other costs.”
Richards would like to charge less for some rentals, but outside expenses limit his flexibility. “The assumption that a landlord is ‘wealthy’ and can absorb all these costs is foolish,” he says plainly.
“They are in business to earn a profit. Any incurred expenses will be reflected in higher rent. Since everyone competes in the same market, I won’t price myself out. I’d rather charge a fair rate for a good tenant and would happily lower rent if these external costs didn’t exist.”
Your Turn: Renters, does this change how you view your monthly rent? Landlords, are there other costs you’d add to this list? Considering becoming a landlord — do these figures give you pause?
