Fixed vs. variable expenses
Fixed expenses are largely predictable and don't change with occupancy: property tax, insurance, HOA dues, and debt service. Variable expenses move with occupancy, tenant turnover, and the age of the building: repairs, turnover, leasing, utilities, and vacancy.
| Category | Type | How to estimate |
|---|---|---|
| Mortgage principal & interest | Fixed (debt service) | Lender quote; not an operating expense for NOI |
| Property taxes | Fixed | Current rates × realistic value |
| Dwelling/landlord insurance | Fixed | Carrier quote |
| Flood insurance | Fixed | NFIP or private quote; check flood zone |
| HOA dues & assessments | Fixed | Governing documents & resale certificate |
| Property management | Variable | % of collected rent per contract |
| Leasing & renewal fees | Variable | Management contract |
| Vacancy | Variable | Property- and area-specific evidence |
| Maintenance & repairs | Variable | Age and condition of the property |
| Capital expenditures | Reserve | Remaining life of major systems |
| Owner-paid utilities | Variable | Lease terms and utility history |
| Landscaping & pest control | Fixed/variable | Vendor quotes, HOA rules |
| Turnover / make-ready | Variable | Paint, cleaning, repairs between tenants |
| Legal & accounting | Variable | Professional fee quotes |
| Advertising | Variable | Often included in leasing fee |
| Licensing or registration | Varies | Verify local requirements |
Why one percentage doesn't fit every property
Rules of thumb like "expenses are half the rent" can be useful sanity checks, but they ignore the variables that actually drive cost: taxes in that specific jurisdiction, the insurance quote for that roof, the age of that HVAC system, whether that HOA covers exterior maintenance. A 1960s house and a 2020 townhome at the same rent can have very different expense profiles.
Reserves and emergency repairs
Beyond monthly capex reserves, keep a cash cushion for the repair that arrives all at once — a failed compressor in August, a slab leak, a water heater. Your reserve is what prevents a single event from forcing a bad decision.
Worked example
| Expense | Monthly |
|---|---|
| Property tax ($6,600/yr) | $550 |
| Insurance ($2,400/yr) | $200 |
| Vacancy (5%) | $120 |
| Management (8%) | $192 |
| Maintenance (5%) | $120 |
| Capex reserve (5%) | $120 |
| Operating expenses incl. vacancy | $1,302 |
| Mortgage P&I | $1,497 |
| Total monthly outflow | $2,799 |
Operating expenses plus vacancy consume about 54% of gross rent here before the mortgage — and the deal runs negative once debt service is added.
Expense checklist
- Property tax verified by taxing unit
- Dwelling insurance quote
- Flood zone checked and flood quote
- HOA dues, assessments, leasing rules
- Management agreement fees
- Vacancy assumption with evidence
- Maintenance based on age/condition
- Capex reserve by system
- Utilities the owner pays
- Landscaping and pest control
- Turnover costs
- Legal/accounting
- Cash reserve for emergencies
Test your expense assumptions
Put every monthly cost beside the rent and see the real margin.
Compare Rent vs. ExpensesSources & Further Reading
- Harris Central Appraisal District — Property search, appraisal notices, and protest information. hcad.org
- Texas Comptroller of Public Accounts — Property Tax Assistance. comptroller.texas.gov/taxes/property-tax/
- FEMA — Flood Map Service Center. msc.fema.gov/portal/home
- FEMA / National Flood Insurance Program — FloodSmart. www.floodsmart.gov
- Harris County Flood Control District — Flood information and tools. www.hcfcd.org
- Texas Department of Insurance — Homeowners and dwelling insurance consumer help. www.tdi.texas.gov
- Internal Revenue Service — Publication 527, Residential Rental Property. www.irs.gov/publications/p527
Sources accessed for review on October 5, 2026. Laws, rates, and programs change — confirm current details at the source.
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