How to Estimate Maintenance Costs for Rentals

Maintenance is one of the easiest line items to underestimate when evaluating a rental property. If your reserve is too low, your projected ROI can look much better on paper than it will in reality.

Use the 1% Rule as a Starting Point

A practical benchmark is to reserve roughly 1% of the property value per year for ongoing repairs and replacements. For a $250,000 property, that means planning around $2,500 annually, or about $208 per month.

Adjust for Property Age and Condition

Older properties, deferred maintenance, and heavy tenant turnover usually require a larger reserve. Newer homes in good condition may operate below the 1% benchmark for a period, but they still need a cushion for unexpected failures.

Separate Repairs from Capital Expenses

Small repairs like plumbing fixes, appliance service calls, and paint touch-ups should be budgeted monthly. Larger capital items such as roofs, HVAC systems, and exterior work should be planned as long-term reserves.

Track the Real Number Over Time

After acquisition, compare your actual maintenance spend against your underwriting assumptions every quarter. Over time, your own data will become more reliable than any broad market rule.

If you want more accurate ROI projections, always test a conservative maintenance assumption before making an acquisition decision.