Holding, or carrying, costs are one of our numbers that represent the amount of money required to hold, or own or carry, the property until you sell or rent it. It is the amount you pay to keep the property for one month. So if you pay a mortgage, taxes, insurance, utilities, lawn maintenance, or another expense to own or maintain the property, then these are considered holding costs. And of course the longer you hold on to the property, the more it will cost you and less you will make in the end.
These expenses must be considered in the overall estimate of buying a property. Depending on the area, you need to estimate how long it would take you to sell or rent the property. If you have a buyer lined up already, your holding costs will be minimal. But if you find that three months have gone by and no one has paid any real interest in it, your holding costs for that period are three times your monthly expenses.
Unfortunately these costs can add up if for some reason your property is not of interest. You can see these examples in homes that have signs or listings touting “New Price!” “Reduced,” or other such wordage. A property that sits for sale or rent for more than month or so scares investors off and you may just have to lower the price even more just to break even and get the hell out of the deal.
On the positive side, holding costs are the one expense that are going to be fairly consistent month after month. Rarely will they change and this allows you to easily budget for them—if you have the money to carry the property.