Rental property startup costs: a first-year budget

The costs of buying

These come due at or before closing: the down payment, lender and title fees, the inspection, an appraisal if asked for, and prepaid insurance and property tax. Some closing costs are added to the property's cost for tax purposes instead of being deducted in one year, so keep the closing statement and give it to your preparer.

The costs of getting it rented

• Repairs the inspection found.
• Paint, cleaning and floors where needed.
• New locks or rekeying, smoke and carbon monoxide alarms.
• Photos, and any listing costs.
• Utilities during vacancy, because the lights and heat need to be on to show and protect a home.
• Any legal forms or a lease template your state requires.

Large repair and replacement work can be treated differently by the IRS than small repairs, and depreciation begins when the property is placed in service. Keep an invoice and a one line note for each job.

The reserve

Keep cash for what happens after closing: an appliance, an empty month, a surprise tax bill. A common way to size it is a number of months of the property's costs, including the loan payment. Pick a number you can explain and keep it in a separate account.

A made-up first year budget

Example the table above is made up and adds to $64,600: $44,000 plus $6,000 plus $3,500 plus $1,500 plus $1,600 plus $8,000. The down payment is two thirds of the cash, but the other $20,600 is where first time owners tend to be short.

When the money is needed

• Before an offer: the earnest money and the inspection fee.
• At closing: the down payment, closing costs and prepaid items.
• In the first month: repairs, locks, alarms and cleaning.
• Before the first rent arrives: utilities, insurance and any listing costs.

The same dollars are due at different times, and the timing is what catches first time owners. Lay the four moments out on a calendar so you know the date each amount is due, and confirm you have the cash on hand for each, not only for closing day. Rent usually starts weeks after you pay the first bills, so plan the gap before you commit. If the numbers leave no room for a gap, either lower the purchase budget or wait. Sellers' credits, a longer closing date and a smaller repair list can all change the timing, so raise them in the offer, not after. Keep the list with your pro forma so the two documents agree on the same figures. Also ask your lender and insurer which of these costs they will want paid in advance, because some prepaid items are due at closing and are easy to forget when you build the budget from the purchase price alone. Add each one to the table as its own line.

How DoorKeeping handles it

DoorKeeping records each startup cost against the property, so your repair bills, insurance and first expenses are on the property's books. You can ask Claude or ChatGPT, for example, "What have I spent on the Elm Street house since closing?" and send the list to your preparer. Approvals stay with you.

Tenants pay rent to your own bank account by bank transfer, free from DoorKeeping, and DoorKeeping marks rent paid when the deposit matches.

Sources

1. Topic no. 414, Rental income and expenses, IRS, read Oct 30, 2026
2. What is landlord insurance?, Progressive, read Oct 30, 2026

Questions

How much cash do I need to buy a rental?

More than the down payment: add closing costs, repairs, insurance and a reserve. The made-up table above shows the shape of the budget, not your numbers.

Are closing costs deductible?

Some are added to the property's cost instead of being deducted at once. Ask your tax preparer.

Why keep a reserve?

Repairs and empty months do not wait for rent, and a reserve keeps you from borrowing for them.