5 costs that catch landlords out – and how to minimise them

Being a landlord sounds easy: buy a property, rent it out to help pay off your mortgage, and hope it grows in value. But it’s not quite that simple.

With costs rising, many landlords are doing it tough.

“Landlords have been under immense financial pressure, despite the increase in rents,” says Cate Bakos, chair of Property Investment Professionals of Australia (PIPA), a professional body that supports and advocates for ethical property investment standards. “Interest rate hikes have hurt landlords, alongside higher costs for compliance and minimum standards. In some states, such as Victoria, heightened land tax obligations have been challenging, too.”

Many landlords have seen operational costs increase significantly, Bakos says. In PIPA’s 2025 Annual Investor Sentiment Survey, 60 per cent of landlord respondents reported cost increases of between 11 and 41 per cent over the year to August 2025

That doesn’t necessarily mean property investment is unsuitable. But it does mean that prospective landlords should go in with their eyes wide open.

“It is essential that landlords model all costs, including new taxes,” Bakos says. “Understanding the ‘out of pocket’ expenses, including taxes, insurances, surprise maintenance costs, as well as compliance costs, can make the difference between holding and folding.”

Here are five costs that can take first-time landlords by surprise, along with practical ways to plan for them and minimise the impact.

1. Compliance costs

In some states, checks covering items such as smoke alarms and gas and electrical systems are mandatory before a property can be rented out. “Costs can range from $400 upwards,” Bakos says. “The sting in the tail occurs when bigger issues arise.”

What you can do about it: “We always recommend a thorough building inspection to flag potential issues,” Bakos says. You might also try to arrange access to the property prior to settlement, to get your compliance reports done early, and avoid delays getting tenants in place.

2. Rent defaults

Tenants’ circumstances can change for reasons outside their control. They might lose their job, separate or become unwell. If rent isn’t paid, it can create financial stress for a landlord.

“It’s not an option for a landlord to ask their bank for a pause on repayments due to a tenant’s non-payment,” Bakos says.

What you can do about it: Landlord insurance may provide cover for certain loss-of-rent scenarios, Bakos says. Depending on the policy, landlord insurance can cover a range of loss-of-rent situations that may not be included in standard home and contents policies.

3. Essential services breaking down

“We all know it,” Bakos says. “The hot water service decides to die. The oven door breaks. The heater packs up. These are essential items, and tenants have a right to have them fixed immediately.”

What you can do about it: Regular maintenance may reduce the likelihood of some breakdowns, though sometimes things will just stop working. “Landlords should provision a suitable float to see to these items when they arise,” Bakos says. “A responsive landlord equates to a happy tenant-landlord relationship.”

4. Tenant damage

Even with careful tenant selection, there is still a risk of accidental or unexpected damage to a property. Items can break, appliances can fail, and repairs can be more costly than anticipated.

“We all hope to avoid this one, but even the most seasoned investors will talk about this risk,” Bakos says. Tenant damage – whether that be malicious, deliberate (but not malicious) or accidental – is surprisingly common; landlord insurance specialist Terri Scheer says it is the most common claim category (followed by loss of rent).

What you can do about it: Landlord insurance may help with some damage-related costs, Bakos says. Some landlords also use screening processes to help manage risk.

5. Managing your own property

Self-managing a property, rather than hiring a property manager who may charge around 5 to 10 per cent of rent each month, may seem like a cost saving. However, a property manager may assist with tenant applications, day-to-day communication, and staying on top of maintenance and legal obligations. They can also be helpful if disputes arise, Bakos says.

What you can do about it: Engaging a property manager can reduce some of the workload and risks associated with self-management, Bakos says. “Those who DIY it risk selecting a troublesome tenant and falling over if issues make it to the tribunal.”

Terri Scheer is Australia’s leading landlord insurance specialist. For more information, visit www.terrisheer.com.au.

This article is general information only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you and seek independent advice before making any decisions.

Insurance is issued by AAI Limited ABN 48 005 297 807, trading as Terri Scheer. Before buying insurance, read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) available at www.terrisheer.com.au.