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What Are Carrying Costs In Real Estate?

Mar 9, 2024



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’ll own it and how much you can make on it all must be weighed before jumping in.

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

What Are Carrying Costs?

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

For example, let’s say you take out a loan to flip a house. If it takes you 4 months to sell the home, you’ll need to make 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 real estate investment.

How much carrying costs are will depend on what type of investment you make, and which fees apply to your investment.

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Types Of Carrying Costs For Real Estate Investors

There are different types of carrying costs in real estate. You’ll need to factor each of these into the total cost 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 depending on where you live and are usually calculated by finding the assessed value of the property, deducting any exemptions then applying your county’s mill rate. 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. You can also research the average property tax rates in your state.

Mortgage Payments

If you’ve taken out a mortgage to finance your investment, you’ll need to factor in monthly payments as a holding cost. Each state’s median varies, but the national average mortgage payment in 2023 reached $2,051, according to the National Association of REALTORS®. The type of loan you take out, among many factors, 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 property, 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 required depending on the situation.

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

For rental properties, you’ll need to sign up for rental property insurance. Premiums 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

If your property is in an area governed by a homeowners association (HOA), you’ll have to pay HOA fees. These can differ depending on where you live, but they can be expensive and change with little warning. HOA fees can range from $100 – $1,000, but typically average about $300. You also need to be aware of any HOA rules regarding remodeling, maintenance and more that can impact how much you’ll pay in total.


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 details 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 when you need to leave it on.

Property Management

Property management fees only apply to rental properties. If you’re considering investing in multiple rental properties, you don’t live near the rental property or you’re 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 8% – 12% of the monthly rental charge, along with other property management 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 lawn care. 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.

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Examples Of Fees That Don’t Count As Carrying Charges

You can better understand carrying costs by learning what doesn’t count as well. Carrying costs are ongoing fees associated with owning a property, so any costs associated with buying or selling the home won’t qualify. Here are some examples of non-carrying charges:

  • Closing costs
  • Down payment
  • REALTOR® fees
  • Earnest money deposit
  • Moving costs

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The Downside To Carrying Costs

Not knowing how much carrying costs are can have a negative impact on property owners. These costs can fluctuate with seasons, changes in property value and changes in the property. If you don’t account for 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.

How To Calculate Carrying Charges

Calculating how much you’ll pay in carrying costs begins with determining which you’ll have to pay. Once you know which carrying charges you’re responsible for, you can add up your monthly fees and multiply them by 12. This amount will tell you the annual carrying charges you’ll need to account for.

It’s important to calculate this estimate because it should guide the amount you can offer to buy an investment property. You may also use this number to determine how much you’ll need to charge in rent so you’re generating enough income to pay for carrying charges and still see a profitable cash flow.

The Bottom Line: Be Prepared To Pay Carrying Costs When Investing In Real Estate

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’ll profit off a real estate 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’ll be part of your monthly expenses and should be factored into the rent you charge your tenants.

Whether it’s for your primary residence or a “buy-and-hold” investment, start the mortgage process today with Rocket Mortgage®.


Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.