How much should landlords set aside for property maintenance?

By Carolyn Parrella | Published 22 November 2024 | Last Updated 19 October 2026

Property maintenance costs for landlords can be one of the largest ongoing expenses associated with owning an investment property. However, it can also be one of the hardest costs to predict.

A property may require very little work for several months before an appliance fails, a plumbing problem arises or several maintenance requests arrive at once. Ensuring you can afford to maintain your investment from the outset may help reduce stress when unexpected costs arise.

Responding to residential property maintenance requests promptly and effectively can also help support a positive rental experience, although outcomes such as tenant retention will depend on a range of factors.

How much should you budget for rental property maintenance?

While there’s no single answer to the average maintenance cost for a rental property, one common approach is to budget around 1% of the property's value each year.

Under this method, the estimated annual maintenance budget for a property valued at $500,000 would be $5,000. This is sometimes known as the 1% rule and should be used as a broad starting point only, not a recommendation for your particular situation.

However, the 1% rule is only a general budgeting guide. It doesn’t account for:

• the age and condition of the property
• the condition of its appliances and fixtures
• previous renovations or upgrades
• whether some maintenance is covered by strata or an owners corporation
• local trade and material costs, or
• the type of property you own.

A newer apartment with shared building maintenance usually requires a different budget from an older freestanding house with ageing plumbing, heating and appliances.

Use previous maintenance costs to calculate your reserve

If you have owned the property for at least a year, your previous spending may provide a more tailored starting point. Reviewing the costs for repairs and maintenance on your rental property can also help you better understand the ongoing cost of being a landlord and prepare for future expenses.

As a general guide only, you could calculate an initial maintenance reserve by considering the following steps:

1. Review what you spent on maintenance and repairs over the past 12 to 24 months
2. Calculate the average monthly amount
3. Multiply that amount by three to six months
4. Add an allowance for any other property costs you want the fund to cover.

For example, if you have spent an average of $300 a month on maintenance, a three-month reserve would be $900 and a six-month reserve would be $1,800.

This amount may be enough for smaller repairs, but it likely will not cover the failure of an expensive appliance or several problems occurring together. Consider the cost of repairing or replacing major items when deciding whether your target needs to be higher.

If you have recently purchased the property and do not have a maintenance history, review the building inspection report, property condition report and the age of major fixtures and appliances.

What affects how much a landlord should set aside?

While there’s no universal property maintenance pricelist, here are some factors that can help you decide whether to maintain a smaller or larger reserve.

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Keep in mind you don’t need to reach your full target immediately. If several months of expenses feels out of reach, begin with enough to cover one substantial repair or your insurance excess and build from there.

What property maintenance costs should landlords prepare for?

The amount of residential property maintenance required will depend on the property, but common areas include:

• plumbing and hot water systems
• heating and air conditioning
• electrical fixtures and wiring
• kitchen and laundry appliances
• curtains and blinds
• floors, countertops and other surfaces
• windows, doors and locks
• paint and wall coverings, and
• gardens, gutters and outdoor areas.

Older properties may be more likely to experience several issues within a shorter period. However, even a relatively new property will require routine servicing and occasional repairs.

Maintenance costs are also not distributed evenly throughout the year. You may spend very little during one period and then need to pay for several repairs at once. This is why simply including a small maintenance amount in each month’s budget may not provide enough protection.

Create a landlord maintenance fund

A landlord maintenance fund, sometimes called a rental property emergency fund or rainy-day fund, is money set aside specifically for property-related costs.

It differs from your general savings because the money has a defined purpose. Rather than drawing from funds intended for household bills, holidays or personal emergencies, you have money available to help keep the rental property safe and operational.

Your fund might be used for:

• urgent plumbing or electrical work
• repairing or replacing a hot water system
• several maintenance requests received close together
• cleaning, gardening or rubbish removal after a tenancy
• minor repairs that are not covered by insurance
• an applicable insurance excess, or
• urgent costs that arise before an insurance claim is finalised.

Some landlords also include an allowance for vacancy, advertising and reletting costs in their rainy-day funds. So, it’s up to you to consider whether you want one broader landlord reserve or separate funds for different types of costs.

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Keep capital improvements separate

Maintenance generally involves keeping a property in its existing condition. Capital improvements involve changing or improving the property, such as:

• installing air conditioning
• replacing carpet with floorboards
• renovating a kitchen or bathroom
• adding new outdoor features, or
• making upgrades intended to increase rent or resale value.

If you plan to improve your property, it might be a good idea to create a separate budget based on your investment goals and what you can reasonably afford. Keeping this money separate can give you a clearer view of what’s available for urgent repairs.

You may also wish to seek independent tax advice about how different property expenses are treated.

How to build your landlord maintenance fund

Set a realistic target

Start with the property’s previous expenses, condition and likely repair needs.

Consider:

• the age of the building
• the age of the hot water system and major appliances
• any issues identified during inspections
• strata or owners corporation responsibilities
• your insurance excess
• local vacancy conditions, and
• property management and reletting costs.

Your first milestone could be enough to cover one significant repair. You can then work towards a larger reserve over time.

Separate your money into different accounts

It could help to consider using a dedicated savings or offset account where appropriate, but this is up to you and your circumstances. Separating the money makes it easier to monitor and less likely to be spent on unrelated expenses.

If you own several properties, you might maintain a fund for each property or one larger portfolio reserve. Whichever method you choose, keep records showing how much is available and what it’s intended to cover.

Make regular contributions

One practical option may be to arrange an automatic transfer on the day you receive rent or on a set day each month, if this suits your cash flow and circumstances.

You could contribute a fixed amount or direct a percentage of your rental income into the fund. Even modest, regular contributions may help build a useful buffer over time, but the right approach will depend on your objectives, financial situation and needs.

Replenish your maintenance fund after using it

Using the fund doesn’t mean your budgeting has failed. Covering uneven or unexpected property expenses is what the money is there for.

After using some of the reserve, consider temporarily increasing your contributions until it returns to your target amount.

Review the amount each year

Your maintenance budget should change with the property and your circumstances.

Review it when:

• the property or its appliances age
• repair and trade costs increase
• the rent changes
• your loan commitments change
• you acquire or sell a property
• your insurance excess or cover changes, or
• your comfort with financial risk changes.

An annual review can prevent your reserve from becoming an outdated estimate.

Why prompt property maintenance matters

Having funds available may allow you to approve essential work without waiting for the next rental payment or reorganising your personal finances.

Responding promptly can help you:

• prevent smaller problems from becoming more expensive
• keep the property safe and functional
• meet your responsibilities as a landlord
• provide tenants with a better rental experience, and
• reduce the likelihood of avoidable disputes or dissatisfaction.

A well-maintained property may help support tenant satisfaction and, in some circumstances, may contribute to longer tenancies. However, outcomes such as rental income stability, vacancy periods and turnover costs can be affected by many factors outside maintenance planning.

What is the difference between a maintenance fund and landlord insurance?

A maintenance fund is a financial buffer for everyday property ownership costs. Landlord insurance is a separate product that may provide cover for certain insured events and tenant-related risks, depending on the policy selected and the circumstances of a claim. Your maintenance fund is money you control and can access directly. It can be used for:

• routine maintenance
• regular wear, tear and gradual deterioration
• minor repairs, and
• other expenses that may not be covered by insurance.

It’s important to understand that landlord insurance does not replace the need to budget for routine maintenance, deterioration or every property-related expense. Similarly, money set aside for maintenance is not a substitute for considering whether insurance is appropriate for your circumstances.

Maintaining accessible savings alongside insurance that is appropriate for your circumstances may help provide broader financial resilience. Your savings can help with immediate or uninsured expenses, while insurance may respond to eligible events specified in your policy.

If you want to explore landlord insurance, compare the available Terri Scheer options carefully. Different products are designed for different types of rental arrangements and property management situations, and cover is subject to eligibility, terms, conditions, limits and exclusions. Read the relevant Product Disclosure Statement and Target Market Determination before deciding whether to proceed.

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Plan for maintenance before it becomes urgent

No formula can predict exactly what a rental property will cost to maintain each year. The 1% rule can provide an initial estimate, but the property’s age, condition, maintenance history and major appliances will give you a more complete picture.

Start your rainy-day fund with a realistic amount, contribute regularly and review your target as the property changes. A dedicated maintenance fund can help you respond sooner, protect your cash flow and keep your investment property operating when an unexpected expense arrives.

Before requesting a quote, consider whether the product is likely to be suitable for you based on your rental arrangement, property management situation and the information in the relevant disclosure documents. A quote journey can help you understand available options, but it should not be treated as personal advice.

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