Owning a home or building a rental portfolio can be a great way to build wealth, but the costs of owning go beyond the initial purchase price.

Wait… so there’s more expenses to consider after you purchase? – Yep, sure is!

I like to refer to them as Phantom Expenses.

These added costs can be one-time or monthly recurring… Either way, they should be considered in the budget prior to house hunting.


Most people don’t realize this, but… utilities are NOT factored into your loan application when you are applying for a mortgage.

Not only do most people overlook utility costs, lenders actually exclude them!!

When you own, you will be responsible for any mandatory and voluntary utilities.

For instance, you will need to pay for garbage, water, sewer, electricity, and likely gas. These are the bare minimum required to run your property.

But, what about TV? Or Internet? – Yep.. these are additional.

It is NOT uncommon in Placer County to have monthly utilities that look like this (FYI – this is approximation):

  • Garbage, water, sewer – $130 per month
  • Electricity – $150-$300
  • Gas – $80-150
  • TV and internet – $100-$150

Total expenses: $460 – $730

Starts to add up quickly right?

If you live in the home as a primary residence, you will be responsible for all of these costs. If it is a rental, only a couple will apply.

Needless to say, it is a good idea to check with the utility providers upfront and find out the average usage and average costs are in the area you are considering.

Repairs & Maintenance

This category MUST be considered when purchasing a home or rental property.


Because, ITS A HOUSE! 🙂

And… When homes age, and have people living in them, things tend to get worn down and break.

Including repairs and maintenance in the budget is a GREAT idea!

What falls in this category? – See below

  • Painting
  • Cleaning
  • Electrical repair
  • HVAC repair
  • Yard care
  • Locks, keys, security
  • Pest control
  • Snow removal (depending on where you live)
  • Roof repairs
  • Doors & window repairs

Basically, anything that is routine or recurring. For instance, if a tenant is moving out and you clean the unit, touch up the paint, and change the locks… this would fall under the repairs and maintenance category.

Budgeting for this is more of an art than a science. To do it properly, you really need to consider the homes age, condition, weather, and location… But, as a general rule of thumb, you can budget $1 per sq ft (i.e. A 2,000 sq ft home would need approx. $2,000 per year in the budget for repairs/maintenance).

If you are interested in fine tuning your repair/maintenance budget, check out this wonderful article by Paula Pant HERE

Capital Expenditures

Generally speaking, a capital expenditure is a large one-time expense that improves and/or upgrades the property.

This would include items like…

  • New roof
  • New appliance
  • New HVAC system
  • New flooring & carpet
  • New doors & windows
  • New plumbing & electrical
  • Remodeling

Notice how most items are “new”?

Well, capital expenditures are usually replaced one time and are designed to extend the useful life of the property and/or make the asset more efficient.

Budgeting for this is also challenging because you need to consider the same factors as repairs. Whats the age, condition, location, etc? As a general rule, I would use a similar method to the repair budget ($1 per sq ft) and then simply make a judgement call based on the different factors of the home.

For example, if the home is brand new, you don’t need much of a CAPEX budget because all major components are brand new. Conversely, if the home is 100 years old (and you know it will need a new roof in 2 years), you may want to increase the CAPEX budget to make sure you can cover the expense in the near future.

For more information on the differences between repairs and CAPEX (capital expenditures), check out this article, by Marco Santarelli.

Taxes & Insurance

Honestly, taxes and insurance are not really a “phantom” cost. Everyone knows about them going into a home purchase.

But… they are recurring expenses whether you have a mortgage or not. Therefore, they are still a liability which takes money out of your pocket until the day you sell. – Just something to keep in mind and include in the budget. 

The cost of taxes and insurance different greatly based on location. But, lets say you are looking to purchase a $400,000 home in Placer County.

Your property taxes will cost you roughly 1.2% of the purchase price on an annual basis. (i.e. $400k x 1.2% = $4,800 per year or $400 per month). – This is a rough estimate. 

Insurance – This will vary based on your coverage and location, but lets just ball park it at $100 per month.

Summing it up

This information is intended to bring awareness to the true cost of home ownership, not to scare you away. LOL

The “phantom expenses” are simply a part of owning real estate and any homeowner or investor should be aware of them to make an educated decision.

If accounted for properly, real estate is still the I.D.E.A.L. investment long term (in my opinion).

Hope you find this information useful!

All the best!

Want to buy, sell, or invest in real estate?

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We cover Sacramento & Placer County in California with a special focus on Roseville, Rocklin, Loomis, Penryn, Lincoln, Newcastle, Orangevale, & North Natomas (Sacramento).

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