The True Cost of Property Management

Profit Is More Than Rent Minus Mortgage

Most new landlords think that “rent minus mortgage” is the same as “profit”. But any experienced investor will tell you that this is only the beginning.

When you own property, you have to deal with people, maintenance, and surprise costs. The real skill is being able to plan for these costs before they happen.

At Genius Academy, we teach investors to think like business owners—because a rental property is a business, and every business has costs associated with doing business.

Why You Need to Plan for Management

Not taking management costs into account can turn a profitable deal into a money problem. Lenders, accountants, and smart investors all consider recurring costs because they directly impact net yield and ROI.

When you create a solid budget, you can:

• Know your real returns, not inflated ones.

• Avoid cash flow shocks during voids or repairs.

• Set realistic rent prices aligned with maintenance standards.

1️⃣ Fees for Letting and Managing

If you hire a letting agent, expect to pay:

• Find a tenant: 6–10% of the annual rent (one-time fee).

• Full management: 10–15% of monthly rent.

For example, if rent is £1,200/month, 12% = £144/month (£1,728/year).

Even if you self-manage, set aside funds for:

• Advertising on portals.

• Tenant referencing and inventory reports.

• Annual gas and electrical safety checks.

  
  

2️⃣ Upkeep and Fixes

Every property needs regular maintenance. Boilers break, roofs leak, and tenants call at 9 p.m. A good rule of thumb is to set aside 10% of annual rent for maintenance.

For instance, if annual rent = £14,400, save £1,400/year (£120/month). This fund cushions you against costly repairs later — even if you don’t use it every year.

3️⃣ Time Off and Rent Loss

You still owe your mortgage even without tenants. Plan for 1–2 months of lost rent per year (≈ 8–15% of income).

High-quality tenants and proactive agents reduce voids — but even top markets experience them, especially during refurbishments or tenant changes.

4️⃣ Safety and Compliance

Landlords today face more regulations than ever. Typical yearly or periodic compliance costs include:

• Gas Safety Certificate: £60–£100

• EICR (Electrical Check): every 5 years, £150–£250

• EPC Renewal: every 10 years, £60–£120

• Licensing: £500–£1,000 (varies by council)

While small individually, these add up — and non-compliance costs far more in penalties and lost rent.

5️⃣ Insurance and Accounting

• Landlord insurance: £200–£400/year (property-type dependent)

• Self-assessment or company accounts: £200–£600

• Legal cover: optional but valuable for multiple tenancies

Include these in your cash-flow forecast to ensure your portfolio runs sustainably—not reactively.

Example: A Breakdown of Realistic Annual Costs

Type of Cost	% of Rent	Example (Rent £1,200/mo)	Annual Cost
Management Fees	12%	£144	£1,728
Maintenance	10%	£120	£1,440
Voids	8%	£96	£1,152
Safety & Insurance	3%	£36	£432
Accounting & Admin	2%	£24	£288
Total Estimated Costs	35%	—	£5,040/year

That’s 35% of your gross income before mortgage or tax — a crucial figure when calculating net yield.

6️⃣ Why It Matters for Profitability

Knowing your ongoing costs affects how you analyse deals. It lets you calculate net yield, not just gross yield, and make fair comparisons between properties.

Formula Recap: Net Yield = (Net Annual Income ÷ Purchase Price) × 100

Ignoring costs might make a deal look good on paper, but true professionals act on net returns.

Reflection: Professionalism Pays

Every investor starts with optimism — but professionalism keeps you profitable.

Budgeting for management isn’t pessimism; it’s preparation. By building realistic assumptions into your analysis, you protect both your profits and your peace of mind.

At Genius Academy, we teach landlords that the best investors don’t chase the highest rent—they protect the income they already earn.