Question 1

What expenses do I need to budget for as a landlord?

Accepted Answer

The main recurring expenses are: mortgage payments (if financed), property taxes, landlord insurance, property management fees (8–12% of rent if using a manager), routine maintenance and repairs (budget 1% of property value per year), vacancy (typically 5–8% of gross rent), and any HOA or body corporate fees. Capital expenditure — roof, HVAC, appliances — should be reserved separately, often 5–10% of rent annually.

Question 2

What is a good rental yield?

Accepted Answer

Net rental yield (after all expenses) of 5–7% is generally considered solid for residential property in most markets. Gross yields of 7–10%+ are common in regional or secondary markets. Properties in prime city locations often yield 3–5% gross, with investors betting more on capital appreciation. Your target yield depends on your financing costs — you need yield above your mortgage rate to generate positive cash flow.

Question 3

How do I calculate rental income after expenses?

Accepted Answer

Start with gross annual rent. Subtract vacancy (annual rent × vacancy rate, typically 5–8%). From the remaining effective income, subtract: property management fees, insurance, property taxes, maintenance budget, and any HOA fees. The result is your net operating income (NOI). To find cash flow, subtract annual mortgage payments from NOI. A positive result means the property pays for itself from rent alone.

Question 4

Should I self-manage or hire a property manager?

Accepted Answer

Property managers typically charge 8–12% of monthly rent plus leasing fees. Self-managing saves this cost but requires your time for maintenance calls, tenant screening, inspections, and lease administration. For investors with one or two nearby properties and available time, self-management is common. For remote properties, multiple units, or investors who value time over money, professional management often makes sense. Run both scenarios through the Rental Yield Calculator to see the net yield difference.

Question 5

How do vacancy rates affect my returns?

Accepted Answer

Every month a property sits empty costs you the full mortgage, taxes, and insurance with no income offset. A 5% vacancy rate (about 18 days per year) on a $2,000/month rental costs $1,200 annually. At 10% vacancy, that doubles to $2,400. High-demand rental markets with low supply have lower vacancies; weaker markets or mismanaged properties have higher ones. Always factor in at least 5% vacancy in your projections — never assume 100% occupancy.

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