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Hidden Costs of Property Ownership Revealed

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  Published in Stocks and Investing on Wednesday, February 11th 2026 at 4:58 GMT by The New Zealand Herald
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The Spectrum of Hidden Costs: A Detailed Breakdown

Let's begin with the most predictable, yet often underestimated, expense: property management. While some landlords opt for self-management, the time commitment and potential for legal missteps often make engaging a property management agency a worthwhile investment. These agencies typically charge between 7 and 10 percent of the monthly rental income, a fee that can significantly eat into profits.

However, property management fees are just the tip of the iceberg. Maintenance is arguably the largest and most unpredictable cost. Higgins advises budgeting a minimum of 1 percent of the property's value annually for repairs and upkeep. For a $600,000 property, this translates to a hefty $6,000 per year - and that's a conservative estimate. This isn't simply about fixing minor issues like dripping faucets; it's about preparing for potentially catastrophic failures such as heat pump breakdowns, roof replacements, or burst pipes. These major repairs can quickly deplete savings if not adequately planned for.

Beyond routine maintenance, landlords must also factor in vacancy costs. Even with diligent tenant screening, periods between tenants are inevitable. These 'dark' months represent lost rental income while fixed costs - mortgage, rates, insurance - continue to accrue. A robust financial buffer is essential to weather these periods without jeopardizing cash flow.

The Financial Sting of Problem Tenants

Dealing with difficult or non-paying tenants presents a separate set of financial challenges. Eviction proceedings are notoriously complex, time-consuming, and expensive. Legal fees, court costs, and the inevitable loss of rental income during the eviction process can add up quickly. Evicting a tenant is not only stressful, but can significantly impact the profitability of the investment. Landlords must be prepared for the legal battles that can sometimes arise.

Building a Safety Net: The Importance of a Contingency Fund

To mitigate the risk of unexpected expenses, Higgins strongly recommends establishing a dedicated contingency fund. This fund should be separate from any emergency savings and specifically earmarked for property-related costs. It acts as a financial cushion to absorb major repairs, legal battles, or prolonged vacancy periods. The size of this fund will vary depending on the property's age, condition, and location, but a minimum of several thousand dollars is generally advisable.

Don't Forget the Recurring Bills

It's easy to overlook the recurring annual costs associated with property ownership. Council rates, property insurance premiums, and body corporate fees (if applicable) can collectively add a substantial amount to the overall expense. These costs must be factored into the annual budget to accurately assess the property's net income.

Investment Property: A Business Venture

Higgins concludes by reiterating that being a landlord is fundamentally a business. Like any successful business, it requires careful planning, diligent financial management, and a realistic understanding of the associated risks and expenses. While the potential rewards are significant, ignoring the hidden costs can quickly turn a promising investment into a financial headache. Prospective landlords are urged to conduct thorough due diligence, create a comprehensive budget, and proactively prepare for the inevitable expenses that come with property ownership.