Passive income is one of the most misleading phrases in the English language. In theory, everyone in the world would love to earn passive income. It’s extra money you don’t have to do anything for. Unfortunately, it is almost never as simple as putting in some upfront work and waiting for the money to roll in.

Rather, just about all forms of passive income require a fair amount of work and regular expenses. This is no more true than when it comes to renting out your apartment. Yes, you are making money simply by having people living on your property. But being a landlord is neither cheap nor easy.

To help you get an idea of whether you are ready to become a landlord, these are the most common hidden costs of renting out your apartment.

Repairs and maintenance

Entropy is a simple fact of life. Everything breaks down eventually. However, most people are not ready for just how quickly that happens in a home, especially when someone else is living in it. You have little control over how careful they are, and some people just seem to have bad luck. More importantly, maintenance and repairs you might have put off if you were living there are urgent when you are responsible for the comfort of someone else.

If your tenant has personal liability insurance, you may be able to claim on damages they cause to your things. This is why it is a good idea to ask potential tenants to get renters insurance. Renters insurance is a way of covering your stuff as well as personal liability when you are renting. With renters insurance, your tenants are better prepared to pay for their own mistakes.

Even so, you will find that you spend a fair amount of money taking care of basic maintenance and repairs. It is a natural part of owning property.

Increased taxes and insurance

All homeowners pay taxes and insurance. However, as a landlord, you are classified as an investor rather than an occupant. This raises the amount you pay in taxes and insurance.

There are tax breaks that come with renting out your apartment as well, so be sure to research the regulations particular to your state. Insurance, unfortunately, is inevitably going to cost as much as 25% more and there’s not much you can do about that.

Legal advice

This is probably something you have not really thought about. When renting out your apartment, you are drawing up a legal contract. While you may know exactly what you want to include, you don’t know all the laws and loopholes.

Hiring a lawyer to help you with the contract may be a necessary expense. It is better that you cover yourself fully in the contract from the start than learn some hard (and expensive) lessons down the line.

Background checks

Background checks do not guarantee you will weed out all the bad tenants. In fact, some very good tenants could end up causing you issues through no fault of their own, especially if they suddenly find themselves without a job or with unexpected expenses of their own.

However, background checks do give you a measure of control. It is worthwhile doing credit and criminal checks on every potential tenant before drawing up a contract with them. This is another additional cost that you need to account for when renting out your apartment.


When renting out your apartment, you calculate rent based on what you are paying on the mortgage and the mark-up that will make you a profit. Unfortunately, it is all too easy to do these calculations making the assumption that your apartment will always be occupied.

You may have good reason to believe this if you are renting out in a popular area.  However, even in the best of times, you might suddenly lose a tenant and have to spend a vacant month finding a new one.

In times like these, when uncertainty is the only constant, vacancy is a very real possibility. Going months without getting paid rent is going to be tough. Make sure you account for it when preparing to find tenants and drawing up a contract.