Expenses Every Landlord Forgets About
New landlords often calculate rental yield based on rent minus bond repayment. But there are many more costs that eat into your return. Here are the expenses most landlords forget to budget for.
Key Takeaways
- Budget at least 30-40% of gross rent for costs and vacancies
- Maintenance alone should be budgeted at 1% of property value per year
- Vacancy periods are inevitable — budget for 1-2 months per year
- Agent fees, insurance, and rates add up to significant monthly costs
- Tax on rental income is often overlooked by new landlords
Maintenance and repairs
Properties require ongoing maintenance. A good rule of thumb is to budget 1% of the property value per year for maintenance. On a R1,500,000 property that is R15,000 per year or R1,250 per month.
- Budget 1% of property value per year
- Geyser replacement: R8,000-R15,000
- Roof repairs: R5,000-R50,000+
- Painting: R15,000-R40,000 every 5-7 years
- Plumbing and electrical: variable
Vacancy and bad debt
Even the best landlords experience vacancies. Budget for at least one month of vacancy per year. Also budget for the possibility of a tenant who does not pay rent — evictions take 3-6 months.
- Budget 1-2 months vacancy per year
- Eviction process takes 3-6 months in SA
- Legal costs for eviction: R15,000-R30,000
- Credit checks reduce but don't eliminate risk
Tax on rental income
Rental income is taxable in South Africa. You must declare it on your tax return. The good news is you can deduct many expenses including interest on the bond, rates, insurance, and maintenance.
- Rental income added to your taxable income
- Deductible: bond interest, rates, insurance, maintenance
- Not deductible: bond capital repayment
- Consider registering for provisional tax if renting
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