Price Does Not Equal Cost

5 huge hidden expenses to look out for when buying and investing

Nov 21, 2025

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You should never build your budget based upon the list price alone.

Whether you’re buying your first suburban abode that you and your family will call home, or you’re investing in a duplex halfway across the country, you have to factor in all of the additional fees and expenses that come along with acquiring real estate.

Zillow, Redfin, and Realtor.com do a great job of showcasing the up-front sticker price, but below the surface, there are a laundry list of hidden expenses that can sneak up on you at the closing table.

So to help you avoid any surprises, we’re going to walk through the 5 different ‘cost buckets’ that I cover whenever advising a client through their first purchase or investment.

I’ve categorized them as follows:

Bucket 1: Soft Costs
Bucket 2: Underwriting Costs
Bucket 3: Closing Costs
Bucket 4: Renovation and Repair Costs
Bucket 5: Leasing Costs

Over the next 2 minutes I’m going to give you a brief masterclass on each of these 5 cost buckets.

We’re going to cover the different expenses that fall into each category, how much money you should set aside, and any pro-tips that I can lend in order to help prevent you from overspending in any of these areas.

Let’s start by unpacking Bucket 1 - all of the typical ‘soft costs’ that you’ll have to cover in addition to your downpayment.

Bucket 1 - Soft Costs

‘Soft costs’ can a bit ambiguous. To narrow down the list, you can think of these as all of the miscellaneous expenses that are incurred before entering into contract. For instance:

Traveling to the property.

Taking off time away from work.

Lodging and other accommodations.

As you can imagine, these expenses will vary largely based upon where you’re thinking about buying. If you’re considering purchasing a home or rental property that’s located in another state, you’d have to account for plane tickets, hotel stays, rental cars and dining, plus any pay that you’re going to miss out on from leaving work.

It’s tough nail down an exact dollar amount for these line items, but the average round-trip flight will likely run you about $600, a decent hotel will cost roughly $300 per night, rental cars have gotten pretty pricy recently, I typically budget about $75 a day, and you can fill in the blank for any sunken costs incurred from missing work.

In total, you’re easily looking at $1,500+ before you even place an offer.

To keep these tabs to a minimum, I make an effort to do as much homework as possible before spending a single dollar. This includes researching the neighborhood, asking the broker targeted questions about the property, and gathering any inspections and reports that may be available.

Bucket 2 - Underwriting Costs

Underwriting is a fancy term for due diligence, and due diligence is just another fancy way of saying investigate and inspect.

Running the numbers through an Excel spreadsheet is free, but a homeowner’s inspection, roof inspection, pest inspection, sewer scope, and architect’s assessment can cost a pretty penny.

Gathering all of these various reports isn’t always necessary, but for the vast majority of real estate purchases, it’s wise to get a professional’s 2nd opinion.

Here’s what you can expect to pay for each inspection if you’re carrying out due diligence on a single family home:

Homeowner’s Inspection: $400 - $600

A homeowner’s inspection will cover all of the interior of a property. The inspector will point out any issues, defects, or damage that may go unnoticed to an untrained eye. What’s most important is that the inspector assesses the functionality and remaining lifespan of the property’s mechanicals and high-ticket items - plumbing, electrical, HVAC system, and appliances.

Roof Inspection - Free or A Small Additional Fee ($50 - $150)

The roof inspection is sometimes included with your homeowner’s inspection. If not, the additional cost shouldn’t be too steep. The inspector will either walk the roof themselves - taking photos and making notes of any problem areas - or they will utilize a drone to assess how many more years the roof will hold up.

Pest Inspection - $100 - $250

Some inspectors will carry out the pest inspection, others will outsource this task to an exterminator. The focus of a pest inspection is to spot any rodent droppings or termite activity.

Sewer Scoper - $100 - $250

During a sewer scope, the inspector will run a camera through the sewer stack of the property to ensure that there aren’t any clogs, blockage, or breaks throughout the pipe. If there’s any damage in this department, you have grounds to request that the necessary repairs be made or a sizable concession be provided.

Architect’s Assessment - Varies But Expect A Base Cost of $200+

Calling an architect out to the property is only appropriate when you suspect that there are structural issues or potential problems with the foundation. Both of which can be a deal breaker depending upon the severity.

In summary, you can expect to pay around $500 for a basic suite of inspection reports; all the way up to $1K or more if you choose to carry out extensive inspections.

To avoid over-spending on inspections, here’s one savvy tip that I’m going to give you:

Assess the seller’s inspection reports whenever their available. Sometimes the seller will carry out their own inspections prior to placing the property on the market. When they do, ask to view their findings. Regardless of how detailed of a report they provide, it’s still a good idea to take a deeper look for yourself just in case they missed anything. But leveraging an existing inspection report can save you hundreds.

Bucket 3 - Closing Costs

Next to inspections, closing costs tend to be the biggest ‘surprise expense’ that catches first-time buyers and early-stage investors off guard.

Calculating your downpayment is fairly straightforward - purchase price x downpayment percentage. But points, attorney fees, and title and escrow costs can be a bit more difficult to calculate.

As a ballpark figure, I tend to use 1.5% - 3.5% (of the purchase price) for an estimated total closing cost amount. Depending upon the purchase price of the property, this percentage can end up a bit higher or a little lower, but here are some of the standard fees that you can expect to pay:

Attorney or Title and Escrow Fee - $1,000+ (or 0.25 - .75% of Purchase Price)

Prorated Property Taxes - Vary (Roughly 0.75 - 1.25% of Purchase Price)

Lender Underwriting Fee - $1,500+ (or 0.5 - 1.0% of Loan Amount)

Appraisal Fee - $500 - $800

Notary Fee - $150+

Not included on this list are ‘points’ and other miscellaneous fees that may be imposed by the lender. Points are essentially pre-paid interest payments. The lender will allow you to pay one large lump sum at closing, in exchange for a lower interest rate over the life of the loan. Luckily, the majority of these non-standard line items can be negotiated or waived.

In instances in which I’m not competing against multiple other offers, I try to negotiate with the seller and get them to cover - or at least split - some of the closing costs.

Another thing that you can do to reduce your closing costs is ask your lender which line items you can shop for. Aside from the appraisal and underwriting, lenders will typically allow you to source outside service providers that may be able to provide more competitive rates or lower prices.

Bucket 4 - Renovation and Repair Costs

Once you wrap up with closing and your celebratory champagne toasts, you may have to get your hands dirty.

If you purchased a new-construction home or newly renovated investment property, you can skip this section. But for those that signed up for a little sweat equity, this cost bucket is bound to overflow.

I’ve purchased my fair share of real estate, and no matter how well I crunch the numbers, expenses are bound to run a bit above budget.

Everyone’s list of repairs will differ depending upon the condition of the property their purchasing; so I’m not going to make an attempt to price out each and every aspect of a typical renovation project.

However, I will tell you this:

Regardless of how much money you’ve budgeted for renovations and repairs, add an additional 25 - 50% on top. Even the most thorough inspector is bound to miss something that will cost you later down the line. And it’s far better to be financially prepared, rather than caught off guard by an expensive fix that you never planned for.

Other than setting aside a contingency cushion for your renovation and repair budget, the only additional pro tip that I have to offer is ‘trust but verify’.

There are a ton of great contractors and vendors out there, but there’s also a fair share of bad actors as well. When working with handymen / woman and independent contracts I highly recommend that you place a few guard rails in place to protect yourself from being taken advantage of. Two golden rules to follow are:

Never pay in full up front.
And always inspect their work in person before closing out your tab.

By sticking to these simple rules, it will make it tough for a shady contractor to run off with your money before completing the job to your liking.

Bucket 5 - Leasing Costs

For the fifth and final cost bucket, let’s discuss leasing fees and expenses.

Similar to the Renovations and Repairs bucket, this category isn’t going to apply to everyone. For the first-time buyers that are purchasing a primary residence (i.e. a home that they’re going to live in), feel free to skip to the end. But for any early-stage investors that intend to rent out their property, what I’m going to share should be helpful.

First and foremost, it’s important to understand that your property may not rent as quickly as you’d like. Sometimes the stars align and you’ll receive a flood of applications as soon as you go live; but more often than not, it takes a while to land the ideal qualified tenant.

With this in mind, I recommend that you budget for 30 - 90 days of vacancy.

There’s only been one instance in which I’ve had a property sit for more than three months without much activity; but it’s good to prepare for the worst case scenario. Carrying debt service can get costly.

Secondly, unless you lease up the property yourself, you’re going to have to pay a broker or property manager to source and vet the tenant. It’s customary to pay one month’s rent in the form of commission for them filling the vacancy.

So when it’s all said and done, you may have to float the mortgage and utilities for a month or two, plus pay an additional one month’s rent to the broker or property manager that assisted with leasing.

Early on, this can set your rental income back a bit. But by years two and three, you should have the lease up process down to a science which will help reduce your vacancy costs.

There’s only so much that you can do to reduce vacancy and cut out leasing expenses.

Experienced brokers and trustworthy property managers are worth their weight in gold. So I wouldn’t recommend beating them up too much on commissions if they help you secure a tenant within half the amount of time that it would have taken you to do it yourself or hire a less qualified third party.

Instead, I’d focus on making the property as desirable as your budget will allow. If the numbers make sense, go above and beyond throughout the design and renovation process. Couple this with a competitive rent rate and you’ll position your property to garner a ton of interest from highly qualified applicants; drastically reducing the amount of time that your property will sit vacant on the market.

So there you have it.

These are the 5 different ‘Cost Buckets’ that you should be aware of as you prepare to purchase your next home or investment property.

When your crunching your numbers, do your best not to skip over the smaller line items that come before and after the big down payment. These little expenses add up.

For those that are in the hunt for their next buy - or have already made it into contract - and would like some feedback on the financials of the deal, feel free to send me a private message.

More than happy to give my two cents.

Until next time,

Michael

What’s your take on today’s topic? Do you agree, disagree, or is there something I missed?