The Real Cost of Holding a Property (It’s Not Just the Mortgage)
For many investors—especially those just starting out—there’s a common misconception that holding a property only means covering the mortgage. It’s an easy trap to fall into, especially when you’re running quick back-of-the-napkin calculations. But the reality is far more complex.
Owning a property—whether it’s a long-term rental, a fix-and-flip project, or a house sitting on the market waiting to sell—comes with a range of hidden holding costs that can quickly erode your profit margin if not properly accounted for.
In this blog, we’ll break down what holding costs actually look like, why they matter, and how to factor them into your investment strategy. We’ll also provide example numbers to show how these costs impact your bottom line over time.
Holding costs (also known as “carrying costs”) are the ongoing expenses you incur simply by owning a property, regardless of whether it’s occupied, under construction, or vacant. These costs continue every month the property is in your name.
Holding costs typically include:
Mortgage principal and interest payments
Property taxes
Insurance premiums
Utilities (water, gas, electricity, trash)
HOA fees (if applicable)
Lawn care, landscaping, or snow removal
General maintenance and repairs
Loan servicing fees (if using private or hard money lenders)
Every month that a property is not generating income—whether through rent or a sale—you’re responsible for covering these expenses out of pocket. Understanding these costs is critical for accurate deal analysis and risk management.
Let’s run through an example of a single-family rental property:
Purchase Price: $300,000
Down Payment: 20% ($60,000)
Loan Amount: $240,000
Interest Rate: 7% (30-year fixed)
Monthly Mortgage Payment (P&I): $1,596
At first glance, it might seem like $1,596 is your monthly cost of holding the property. But here’s a more realistic breakdown of the full picture:
In this example, the true monthly holding cost is at least $2,446, nearly $850 more than just the mortgage payment.
If the property sits vacant for three months due to renovation delays, permitting issues, or a slower-than-expected sale, that’s an unexpected $7,338 in additional expenses—money that comes directly out of your profit margin.
Holding costs can quietly erode your profits in several ways:
Many projects—especially flips or heavy rehabs—face delays. Contractors fall behind. Permits take longer than expected. Weather impacts progress. If you budget for a three-month holding period and it stretches to six months, your costs could double.
For example, in the scenario above:
3 months of holding costs: $7,338
6 months of holding costs: $14,676
If you’re planning to flip the property for a $40,000 profit, that timeline extension could cut your net return by 30% or more.
Even buy-and-hold properties aren’t immune. Every landlord will face tenant turnover, and even a few weeks of vacancy can have a significant impact.
If your property rents for $2,000 per month but sits vacant for 45 days, that’s $3,000 in lost rent—yet your holding costs continue. Without a proper vacancy reserve or accurate budgeting, this can catch investors off guard.
Hard money or bridge loans often offer interest-only payments at higher rates, sometimes 10–12% or more. While monthly payments may seem lower than a full principal and interest loan, the carrying cost remains—and you’re accruing no equity.
For example, a $250,000 hard money loan at 10% interest costs roughly $2,083 per month, plus taxes, insurance, and other expenses. Investors who don’t account for this when analyzing deals may find themselves in trouble if an exit takes longer than expected.
Here are key strategies to manage holding costs proactively:
Budget Conservatively: Always build in a time and cost buffer—assume your project may take 20–30% longer than expected, and expenses may be slightly higher.
Calculate Total Holding Costs in Deal Analysis: Don’t just look at the mortgage. Include taxes, insurance, utilities, maintenance, and any other fixed costs in your analysis.
Maintain an Emergency Fund: Keep reserves for at least 3–6 months of holding costs to cover unexpected delays, vacancies, or issues.
Minimize Vacancies: Market your property proactively—list before the rehab is complete, take high-quality photos, and pre-screen tenants. Time on market is money lost.
Stay in Communication with Your Team: Regular check-ins with contractors, property managers, and lenders help you identify delays early and adjust plans as needed.
A True Understanding of Costs Builds Smarter Investors
The true cost of holding a property goes far beyond the mortgage. It’s a mix of fixed expenses, variable costs, and often-overlooked details that can significantly impact your returns.
By understanding the full scope of holding costs, you’ll analyze deals more accurately, plan for contingencies, and build a more resilient investment strategy—one that accounts for the unexpected and protects your bottom line.
Smart investors win by doing the math upfront—before the property is in their name. Make sure you’re one of them.