The second expense you should factor into your analysis is Capital Expenditures also know as Cap Ex.

However to be honest, these are just rough estimates and you really don't know with any precision the capital expenditures that will accrue once you first take possession of the property. 

I'm currently netting about 9% on them (income only and not including price appreciation), but I had the advantage of purchasing them a couple years ago in Tampa, which was good timing in an excellent market (and also had a good year last year with very few capital expenditures and repairs.

We commonly find that between deferred maintenance and capital expenditures, the investor spends much more in the initial stages than they had planned. 

Finally, you should have cash reserves for capital expenditures (CAPEX).

I still own this property and I still benefit from roughly $500 a month net cash flow after management fees and reserves for items such as capital expenditures and vacancy.

Hi Pocketeers!I need some assistance.  Does anyone have any suggestions on a program or software that would allow me to create project files for different projects I'm overseeing?  I need to create the project, track ...

From your initial post I wasn't sure if you accounted for vacancy rate, capital expenditures, property management, etc. so that is very smart you included those in your numbers.

@Nick Bleser In B&H the two biggest external risks are:(A) a decrease in demand and (B) a change in neighborhood desirabilityIn both cases, your revenue is threatened AND there's a potential need to increase expenditures - there isn't much you can do about it.Apply that to market cycles, and you're assuming risk if a cycle is likely to decrease rental demand ... because fewer people will want to culturally rent, because there will be more supply, or because there's a declining population IN THAT AREA.  

I have always calculated 10% capital expenditures, 10% vacancy rate, 10% property management, 5% maintenance/repairs.