Unfortunately there are additional expenses besides your basic principal and interest. Here are the various expenses you will need to budget in your financial pro forma:

Principal

This is the part of your monthly payment that pays down the principal of your loan. Most loans are amortized or “paid off” over 15-30 years. The longer the amortization period, the lower your principal payment each month.

Interest

This is the part of your monthly payment the bank gets for loaning you the money.

Insurance

Typically between $650-$1,000 a year but varies depending on coverage.

Taxes

Taxes are fairly high in Texas because there is no state income tax. Taxes are based on the appraised value of the property (usually much less than what you actually pay) multiplied by the tax rate. The tax rate is approximately 3% right now in DFW.

Management

7-10% of the rent each month depending on property management company.

Vacancy

With a good management company, vacancy rates should be less than 10% in North Texas. Our average vacancy rate at BVC is less than 5%. We usually have new tenants lined up weeks before the previous tenants move out.

Maintenance

It is important to get an inspection before purchasing a property to make sure there are no major problems or deferred maintenance. We suggest you budget between 3-5% of monthly rents for maintenance. It is important to note there will usually be more expenses in the first year. Often times, properties will have some deferred maintenance issues the previous owner did not address that you will have to shortly after buying the property.