What expenses should I consider before buying a rental property?
Reviewed August 2026 by Shannon Miles Group
Rental property expenses fall into two broad categories: operating expenses and financing costs. Operating expenses include property taxes, insurance, repairs, routine maintenance, vacancy periods, property management fees, utilities you pay as the landlord, landscaping, pest control, HOA or condo fees, turnover costs between tenants, leasing commissions, accounting and legal fees, and capital expenditures for long-term replacements like roofing and HVAC. Financing costs include your mortgage payment (principal and interest) and loan-related fees. It is important to distinguish between these categories because they affect your analysis differently. There are no universal percentages that apply to every property.
Understanding every cost of owning a rental property.
Many first-time rental property buyers focus on the purchase price and the potential rent, but the expenses in between are what determine whether a property works for them financially. Here is a detailed breakdown of the costs you should expect and how they fit together.
Operating expenses
Operating expenses are the ongoing costs of running the property. They do not include debt service (mortgage payments). These are the costs that affect Net Operating Income.
Property taxes. Texas does not have a state income tax, and local governments rely heavily on property tax revenue. Tax rates vary by county, school district, city, and special districts. When a property sells, the appraisal district may reassess it at the purchase price, which can increase the tax bill. Review the tax history and understand how reassessment works in that county.
Insurance. Landlord insurance policies are different from standard homeowner policies. They typically cover the structure, liability, and loss of rental income, but they do not cover the tenant's personal property. Premiums vary by property location, condition, age, and replacement cost. Flood insurance is separate and required for properties in flood zones. Get quotes from multiple carriers.
Repairs and routine maintenance. Every property requires ongoing repairs and maintenance. Some costs are small and predictable, such as changing filters, servicing HVAC systems, and landscaping. Others are unexpected, such as a broken water heater, a leaking roof, or an appliance failure. A responsible budget includes reserves for both routine and unexpected repairs. Do not rely on the seller's maintenance history alone. Your own inspection will give you a better picture of the property's condition.
Vacancy. Properties are rarely rented 100 percent of the time. Between tenants, you may have periods with no rental income while still paying all the property's expenses. Marketing costs, showing time, and tenant screening fees add up during turnover. A conservative vacancy allowance reflects local market conditions and property type.
Property management. If you hire a professional property manager, their fees typically include a percentage of monthly collected rent plus leasing fees for placing new tenants. Management fees vary by company and services provided. Even if you plan to self-manage, consider whether you have the time, skills, and proximity to handle it effectively.
Utilities, landscaping, pest control, HOA fees. Depending on the property and lease structure, you may pay for water, sewer, trash, landscaping, pest control, and other services. Condos and townhomes often have HOA or condo fees that cover common area maintenance, insurance, and reserves. Review all required fees before you buy.
Turnover and leasing costs. Between tenants, you may need to clean, paint, make repairs, and advertise the property. Some landlords pay leasing commissions to agents who find tenants. These costs occur each time a tenant moves out.
Accounting and legal fees. Rental property ownership involves tax reporting, record keeping, and sometimes legal issues. Many investors work with a CPA who understands real estate taxation and an attorney for lease agreements and tenant matters.
Capital expenditures
Capital expenditures (CapEx) are major replacement costs for items with long useful lives: roofing, HVAC systems, water heaters, flooring, appliances, windows, parking lots, and siding. These are not annual expenses, but they are real and significant when they occur. Experienced investors set aside reserves for CapEx based on the age and condition of the property's major systems.
Financing costs
Financing costs are separate from operating expenses. Your mortgage payment includes principal and interest, and the terms depend on your loan type, down payment, credit profile, and the property itself. Investment property loans typically have higher interest rates and larger down payment requirements than owner-occupied loans. Loan origination fees, appraisal fees, and closing costs are part of your upfront investment. These costs affect your cash-on-cash return but are not part of the property's Net Operating Income.
No universal percentages
Avoid rules of thumb that claim maintenance is always a certain percentage of rent or that vacancy is always another fixed percentage. Every property is different. A newer property in good condition will have different expense patterns than an older property that has been deferred. A property in a high-demand area may have lower vacancy than one in a softer market. The only way to build an accurate expense projection is to research the specific property, the local market, and comparable properties.
This article is for educational purposes only and does not constitute financial, tax, legal, or investment advice. Consult qualified professionals for guidance specific to your situation.
Rental property expenses in Northeast Texas.
Northeast Texas presents a wide range of expense profiles depending on where you buy. Property tax rates in Collin County school districts can be significantly different from those in Lamar or Delta Counties. Insurance premiums vary by location, with some areas experiencing higher wind and hail risk. Understanding the local cost structure is essential.
For investors looking at rural rental properties, additional expenses may include well and septic maintenance, propane tank monitoring, gravel driveway upkeep, and longer travel distances for service calls and property management. These costs are specific to rural properties and may not apply to town properties with municipal services.
The Shannon Miles Group works with investors across all eight counties in our service area. We can help you understand the local expense environment and connect you with property managers, insurance agents, and other professionals who serve rental property owners in Northeast Texas.
Building your expense framework.
- Get actual expense data, not estimates. Request tax records, insurance quotes, and utility bills for the specific property. Do not rely on averages or rules of thumb.
- Distinguish operating expenses from capital expenditures. Both are real costs, but they affect your analysis differently. Plan for both in your budget.
- Factor in vacancy even if you plan to occupy or manage it yourself. Vacancy is a real cost that affects every rental property. A conservative allowance protects you from being caught off guard.
- Consider the property's age and condition. A newer property may have lower immediate maintenance costs but is not maintenance-free. An older property may need more immediate attention. Your inspection report is the best guide.
- Do not assume you can raise rent to cover unexpected expenses. Rent is determined by the market, not by your costs. If expenses rise faster than rents, your net income shrinks.
We help investors understand the full cost picture.
Call us or stop by our office at 2322 Lamar Ave. in Paris to talk about rental property investing in Northeast Texas.