Apollo AdvisingHow much to budget for maintenance and capital expenses
How much to budget for maintenance and capital expenses on a rental property: percent-of-rent rules, component lifespans, and a reserve schedule you can build in an afternoon.
Short answer. A practical starting point is 10% of rent for maintenance and 5% for capital expenses like roofs, HVAC, and water heaters, then adjust for the property's age and condition. Better still, list the major components, estimate each one's replacement cost and remaining life, and set aside a monthly amount for each. Older homes and short-term rentals usually need more.
Maintenance versus capital expenses
Maintenance is the steady stream of small jobs: a leaking faucet, a broken garage door spring, a service call on the AC. Capital expenses, often called CapEx, are the big, infrequent replacements: a roof, an HVAC system, flooring. Mixing them up is how owners convince themselves a property cash-flows, right up until the roof goes.
The quick rules
- Percent of rent. 10% for maintenance plus 5% for capital items. On $2,200 a month of rent, that is $220 plus $110, or $330 a month. These are the defaults in our rental strategy calculator.
- Percent of value. Some owners budget 1% of the home's value per year for maintenance and repairs combined. It works best for typical single-family homes and can overstate costs for high-value homes in expensive markets.
- Adjust up for homes over about 25 years old, deferred maintenance at purchase, short-term rentals with heavy wear, pools, and older systems.
Build a real reserve schedule
Walk the property and list each major component with a replacement cost and its remaining life. Divide cost by life, then by 12, to get a monthly set-aside. Here is an example for a typical 1,800 to 2,000 square foot house. Costs and lifespans are illustrative and vary with materials, climate, and local prices.
| Component | Replacement cost | Typical life | Monthly reserve |
|---|---|---|---|
| Roof (asphalt shingle) | $14,000 | 22 years | $53 |
| HVAC system | $9,000 | 15 years | $50 |
| Water heater | $1,800 | 11 years | $14 |
| Appliances | $4,000 | 12 years | $28 |
| Flooring | $7,000 | 12 years | $49 |
| Interior paint | $3,500 | 6 years | $49 |
| Exterior paint and trim | $5,000 | 10 years | $42 |
| Fence | $4,500 | 18 years | $21 |
| Garage door and opener | $1,800 | 15 years | $10 |
| Plumbing and electrical updates | $4,000 | 25 years | $13 |
The total comes to about $328 a month, before any routine maintenance. Compare that with the 5% rule, $110 a month on this rent. If your schedule comes out higher, trust the schedule. If a component is near the end of its life when you buy, plan to replace it soon and budget the full cost, not the monthly reserve.
Texas factors
- Hail and wind shorten roof life across North Texas. Insurance may cover storm damage, but deductibles on many policies are a percentage of the home's insured value, which can mean several thousand dollars out of pocket.
- Heat is hard on AC systems and on roofs. Budget for HVAC service every year.
- Expansive clay soils in much of the Dallas-Fort Worth area make foundation movement common. Ask your inspector about it and keep drainage and watering in mind.
Where we fit
We build these reserves into every property analysis so the cash flow you see is the cash flow you will actually get. See how to analyze a rental for the full set of costs.
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Go deeper
Short-term vs medium-term vs long-term calculatorCompare what the same property keeps under each rental strategy, with your own numbers.How to analyze a rental property before you buyCap rate, cash-on-cash return, DSCR, and the expense lines first-time buyers leave out.Self-manage or hire a property manager?What managers charge, what you get for it, and how to price your own time honestly.Airbnb, medium-term, or long-term: comparing what you keepA side-by-side of costs, time, and rules, with a worked example on the same house.This page is general education, not legal, tax, investment, insurance, or lending advice. See our disclosures.