couple talking to agent on carrying costs

What Are Carrying Costs In Real Estate?

Andrew Dehan4-minute read

November 23, 2022


If you’re investing in real estate, there are a lot of costs you must consider. How much you’ll pay for the property, how long you will own it and how much you can make on it all must be weighed before jumping in.

Whether you’re investing to flip the property or holding it as a longer-term rental investment, carrying costs in real estate must be accounted for. Read on to learn what carrying costs are and how to account for them.

Carrying Costs, Defined

Carrying costs in real estate (also called “holding costs”) are the fees for owning a property. As long as you hold on to the investment property, you’ll need to pay them. One of the most common carrying costs is a loan.

Say you take out a loan to finance a flip. If it takes you 4 months to sell the home, you’ll need to pay the monthly payment on the loan while you’re waiting for the sale to come through. This cost also applies in situations like a long-term investment.

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Types Of Carrying Costs

There are different types of carrying costs in real estate. You’ll need to factor each of these into the total costs of your investment. With long-term investments, these costs will be steady and predictable. If you’re flipping a house, you should be prepared to take on these costs for the time you hold the property.

Property Taxes

Property taxes vary from location to location. You’ll need to research online or visit the county assessor’s office to determine the amount in property taxes you’ll be required to pay.

Mortgage Payments

This one’s self-explanatory. If you’ve taken out a mortgage to finance the investment, you’ll need to factor in monthly payments as a holding cost. The type of loan you take out can greatly affect how much you pay.

A traditional mortgage likely won’t be the best option for you if you’re house-flipping. But if you’re investing in a rental, you’ll need to search for the right mortgage to meet your goals.


Whether you’re looking to resell the property quickly or rent it out, you’ll need to pay property insurance. There are different types of insurance depending on the situation.

If the property is vacant or unoccupied, you will need to sign up for a special insurance policy. Contrary to what you may assume, insurance for unoccupied properties is considerably costlier than if the property is occupied. That’s because there’s a greater risk to insurers if someone’s not on the property.

For rental properties, you will need to sign up for rental property insurance. Costs for this can vary greatly depending on property and location. For instance, insurance for a three-story building with 12 apartments will cost considerably more than a single-family, 600-square-foot bungalow.

HOA Fees

Like homeowners, if your property is in an area governed by a homeowners association (HOA), you’ll have to pay HOA fees. These can vary depending on where you live but they can be expensive and change with little warning. You also need to be aware of any HOA rules regarding remodeling, maintenance and more.


Unless you’re renting and your tenants pay all utilities, you’ll need to keep the water, electricity and/or gas on. If you’re curious about a property’s utility bills, you can call the utility companies to see if they’ll give you info on the property’s current bills. You can also request these bills from the seller.

If the property is vacant, you can save money on the utilities by leaving the HVAC off. However, there are instances where you need to leave it on.

If it’s winter and your area dips below the freezing point, you need your house to be warmer so the water in the pipes doesn’t freeze. Freezing water in the pipes will cause the pipes to burst. If this is a possibility, set your thermostat to 45 degrees F to create a buffer so this doesn’t happen.

On the opposite end, if your climate is hot and moist, you should keep your AC on, set to 85. Air-conditioning doesn’t just cool your house – it removes moisture. Leaving the AC on will help prevent mold and mildew growth in humid climates.

Property Management

This applies only to rental properties. If you’re considering investing in multiple rental properties, don’t live near the rental property or are unable or uninterested in managing them yourself, you’ll need to hire a property manager.

A property manager will market vacant rental units, vet tenants, collect rent, handle repairs and more. Expect to pay a property manager 5 – 10% of the monthly rental charge, along with other fees, such as setup fees for new tenants.

Regular Maintenance

Whether you’re renting a property out or flipping it, there will be some maintenance involved. This could be as basic as lawncare. If your property has extensive landscaping, you may need to hire someone to tend it. On the inside, if there’s a lot of traffic in common areas, you may need to hire someone to clean those areas.

The longer you possess the property, the more you’ll have to schedule maintenance. Routine work like gutter cleaning, window washing and more should be done to monitor your property’s condition and avoid bigger problems down the road.

The Dangers Of Carrying Costs

The lack of awareness of how much carrying costs you’ll pay can have a negative impact on property owners. These costs can fluctuate with seasons, changes in property value and changes in property. If you don’t account for these carrying costs, they can really eat into your profit.

Before investing, estimate all possible carrying costs and budget for them. If you’re flipping a property, this could look like being prepared to pay carrying costs for up to 6 months even if you suspect the property will sell sooner. For a rental property, these costs are ongoing for as long as you hold the property.

The Bottom Line

Budgeting for carrying costs is a necessary part of investing in property. By being prepared for these costs, you can more accurately estimate how much you will profit off an investment. If you’re fixing and flipping, you may only have to pay these costs for a few months. But if you’re investing in a long-term rental property, they will be part of your monthly expenses and should be factored into the rent you charge.

Whether it’s for your primary residence or a “buy-and-hold” investment, get started on your journey to buying a home with Rocket Mortgage®.

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Andrew Dehan

Andrew Dehan is a professional writer who writes about real estate and homeownership. He is also a published poet, musician and nature-lover. He lives in metro Detroit with his wife, daughter and dogs.