Your Rental Property Is Losing Money. Here’s Why.

Most Landlords Do Not Know They Are Losing Money

They see rent come in every month and assume the property is profitable. They are not tracking expenses accurately. They are not calculating vacancy loss. They are not factoring in deferred maintenance that compounds every year they ignore it.

If you have not run the real numbers on your rental property recently, there is a good chance it is underperforming. Here are the most common reasons landlords bleed money on rentals.

Vacancy Is the Number One Killer

Every month a unit sits empty, you lose 8.3% of your annual rental income from that unit. Two months empty is 16.6%. That is before you factor in the cost of turning the unit, advertising, and showing it.

A $1,200/month apartment that sits vacant for 6 weeks costs you $1,800 in lost rent plus $500 to $2,000 in turnover costs (cleaning, painting, minor repairs). That is potentially $3,800 gone because you were slow to list it, priced it too high, or did not respond to inquiries fast enough.

The fix is simple. Start marketing the unit before the current tenant moves out. Price it correctly from day one. Respond to every inquiry within hours, not days. In Syracuse and the surrounding CNY market, a well-priced, well-photographed unit should rent within 2-3 weeks.

You Are Underpricing Your Rent

A lot of landlords are afraid to raise rent. They have a good tenant, they do not want to rock the boat, so they leave rent at the same rate for three or four years. Meanwhile, property taxes went up, insurance went up, and market rents in the area increased 15-20%.

Check your comps. Look at what similar units in your area are renting for on Zillow, Apartments.com, and Rentometer. If you are $150 below market on a $1,200 unit, that is $1,800 per year you are leaving on the table. Over five years with no increase, that is $9,000.

Raise rent annually. Even $25-50 per year keeps you closer to market without shocking the tenant. Most tenants expect small annual increases. The ones who leave over a $50 increase were going to leave anyway.

Deferred Maintenance Creates Bigger Problems

That small roof leak you ignored last year is now a rotted joist and a mold remediation project. The furnace you have been nursing along for three years finally dies in January, and the emergency replacement costs 40% more than a planned installation would have.

Deferred maintenance is a loan from your future self at terrible interest rates. Every dollar you save by not fixing something now costs three to five dollars when it finally fails. Budget 1-2% of the property value annually for maintenance and capital expenditures. If your property is worth $200,000, that is $2,000-$4,000 per year set aside for repairs.

Bad Tenants Destroy Units

One bad tenant can cost you $5,000 to $20,000 or more. Damaged walls, ruined flooring, destroyed appliances, pest infestations that spread to other units. Add in the months of unpaid rent during the eviction process and the legal fees, and a single bad placement can wipe out a year or more of profit.

The screening process is your first line of defense. Verify income (3x rent minimum), check rental history by calling previous landlords, run background and credit checks, and trust your gut at the showing. A rigorous screening process costs you $30-50 per applicant and saves you thousands. Cutting corners here is the most expensive mistake landlords make.

You Are Not Tracking Expenses

If you do not know your exact expenses, you cannot know your actual profit. A shoebox full of receipts is not expense tracking. You need to know, to the dollar, what you spent on each property for repairs, utilities, insurance, taxes, management, advertising, legal fees, and every other category.

Many landlords are surprised when they actually add it all up. The property they thought was making $400/month is actually making $75 after accounting for expenses they forgot about. Tracking expenses in a property management system shows you exactly where the money goes.

Overpaying for Repairs

There is a difference between a licensed plumber and a handyman with a wrench. Know which one you need for each job. A clogged drain does not require a $200/hour plumber. A new water heater installation does.

Build a list of reliable contractors at different price points. Handyman for small fixes ($30-50/hour). Licensed tradespeople for code-required work. Get multiple quotes on anything over $500. Landlords who use the same expensive contractor for everything are overpaying by 30-50% on routine maintenance.

In the Syracuse, Oswego, and Auburn markets, labor rates are lower than downstate, but material costs are the same. Factor that into your budgeting.

Property Taxes Are Eating Your Margins

Property taxes in Central New York are among the highest in the country. Onondaga County, Oswego County, and Cayuga County all have effective tax rates well above the national average. On a $150,000 property, you could be paying $4,000-$6,000 or more per year in property taxes alone.

Challenge your assessment if it is too high. Many landlords never do this. The process varies by municipality, but in most cases you file a grievance with the Board of Assessment Review. If the assessed value is above market value, you have a case. Bring comparable sales data. A successful grievance can save you hundreds per year, every year going forward.

Insurance Costs Keep Rising

Landlord insurance premiums have increased significantly over the past few years. If you have not shopped your policy in the last two years, you are probably overpaying. Get quotes from at least three carriers annually. Make sure you have adequate coverage, but do not pay for coverage you do not need.

Umbrella policies are worth considering if you own multiple properties. A $1 million umbrella policy typically costs $200-$400 per year and covers liability across all your properties. One slip-and-fall lawsuit justifies decades of premiums.

You Are Not Using Depreciation on Your Taxes

Residential rental property can be depreciated over 27.5 years. If your building (not land) is worth $150,000, that is roughly $5,454 per year in depreciation you can deduct against rental income. Many landlords either do not know about this or have an accountant who is not maximizing it.

Depreciation is a paper expense. You are not spending the money, but you get to deduct it. This can turn a taxable profit into a tax loss, sheltering your rental income from taxes. If you are not depreciating your rental properties, you are overpaying the IRS. Get a CPA who specializes in real estate.

Evaluating Whether Your Property Actually Makes Sense

The 1% Rule

Monthly rent should be at least 1% of the purchase price. Bought for $120,000, should rent for $1,200/month. This is a rough screening tool, not gospel. In higher-cost markets it is hard to hit. In Utica and parts of Syracuse, you can still find properties that meet or exceed this threshold.

The 50% Rule

Roughly 50% of gross rent goes to operating expenses (not including mortgage). On a $1,200/month rental, expect about $600 in taxes, insurance, maintenance, vacancy, and management. Your net operating income before debt service is the other $600. If your mortgage payment is $700, you are cash-flow negative.

Cash-on-Cash Return

Annual pre-tax cash flow divided by total cash invested. If you put $30,000 into a property (down payment plus closing costs plus initial repairs) and it nets $3,600/year in cash flow, your cash-on-cash return is 12%. Anything above 8% is generally considered solid for rental property.

When to Cut Your Losses

Some properties are money pits. If you have been cash-flow negative for 12 or more months, if a major capital expense is coming (roof, foundation, sewer line) that you cannot absorb, or if the neighborhood trajectory is declining, it may be time to sell.

Holding a bad property because “real estate always goes up” is wishful thinking. Real estate goes up on average, over long periods, in desirable locations. Individual properties in declining areas can lose value for decades.

Run the numbers honestly. If the property does not work, sell it and redeploy the capital into something that does.

If you own rental property in Syracuse, Oswego, Auburn, or Utica and want an honest assessment of whether your rentals are actually profitable, call RenPro Property Management at 315-400-2654. We will run the real numbers with you.