I have often been asked the question, “how much should I expect to spend annually on expenses for my rental property, other than management fees?” While most other expenses on a rental home are related to maintenance, this may also include items such as utility bills during periods of vacancy. To gather data on that question, we contacted several of the largest property management companies in the Colorado Springs market.
Our objective was to determine what percentage of rent proceeds received are used for these expenses. What we found was a low of close to 5%, and a high of close to 15%. The companies that manage a greater number of newer properties came in closer to the 5% mark. Newer properties require less maintenance, they also tend to attract better tenants who leave homes in better condition when they vacate. So, in the Colorado Springs market, our average came in at about 10%. Our conclusion was that landlords can expect to pay somewhere around 10% (give or take 5%) of their gross annual rents towards expenses other than property manager fees. So, if for example we take an average property (age/location) at a 10% expenses cost, for a home that rents for $1,000 per month, home owners should expect to spend around $1,200 per year. This could translate in many ways, it might be that a home owner pays $200 every other month, or they may pay nothing for two years and then get hit with a $2,400 furnace replacement.
Note that the property management companies from which the data was pulled hire licensed contractors whenever necessary (they don’t cut corners), and do not typically sacrifice quality for cost. They do however normally receive bulk discounts of anywhere between 5%-15% depending on the service provided.