These include, at least:Taxes (which may be much different once the property is re-assessed after purchase)InsuranceVacancy allowance (which WILL occur)Property ManagementUtilitiesRepairs / Maintenance (which includes those pesky capital expenditures)Now, that said, the “cap rate†is a return on the investment without regards for financing.

However, future capital expenditures are.

Any expense (as opposed to an expenditure that's considered capital in nature) directly associated with the lease property is deductible.

This would get you to net income.Also, I would subtotal your expenses before you get to your capital expenditures.

You'll hear about the 50% rule which is that, if managed, a property, on average, will consume 50% of the rent in expenses, including both the current expenses and a set-aside for capital expenditures.

And even on that rental, over the last 29 months (since it became a rental), my expenses, including a capital expenditure for replacement of an A/C unit) are running at 30% of my rent.

It simply says the expenses, capital expenditures and vacancy will take about 50% of the gross scheduled rent.

I'm nearing my up front capital expenditures, so I'd obviously not pay the difference.

This includes vacancy/eviction allowance, taxes, insurance, property management, maintenance, utilities, and capital expenditures (BIG maintenance projects.)

I posted my reply too quickly and missed that you're paying cash.You've missed many of the expenses associated with rentals:VacancyMaintenance (mostly caused by tenants)Capital expenditures (mostly in the form of special assessments by the HOA, but also in the form of periodic major expenses)Legal feesCPA feesAdvertisingProperty management.With $1060 in rent, I think you're looking at best at $530 in cash flow, and likely less than that because of the issues others have pointed out with HOAs.