A real estate investor who owned a rental property in the northern suburbs of Dallas shared a recent experience. The tenant paid the rent on time but neglected to report small issues inside the house for several months, which ultimately led to a plumbing problem that cost much more to repair than expected. This was a case where the investor only calculated rental income without planning for management and communication with the tenant.

Dallas consistently attracts interest from Korean families and investors considering investment properties. Recent market trends indicate that rental prices are actually starting to decline. According to RentCafe, as of August 2026, the average rent in Dallas is around $1,592, which is down 0.99 percent from a year ago. This can be seen as a result of increased supply after a period of significant rent increases. The stabilization of rent prices means that investors need to be more conservative in their cash flow calculations.

Texas is a state without rent control. Since 1993, under Texas Government Code Chapter 2143, it has been prohibited for cities or counties to set rent caps, and local governments cannot regulate rent increases unless the governor declares a state of emergency in extremely rare cases. Investors coming from states with strong rent control, like California or New York, may find this difference significant.

However, Texas also has a considerable property tax burden. The average effective property tax rate in Texas is around 1.6 percent, and when school district taxes and county taxes overlap, the actual burden can often exceed 2 percent. Notably, the Homestead Exemption, which applies to primary residences, does not apply to investment properties, meaning that rental homes must pay property taxes on the entire appraised value.

Loan conditions also differ from those for primary residences. Investment property loans typically require a down payment of 15 to 25 percent, which is higher than for primary residences, and while approval is possible with a credit score of 620 or above, a score of 740 or higher is generally needed to secure more favorable interest rates. Interest rates are also typically set 0.5 to 0.75 percentage points higher than those for primary residences. Rental income is not fully considered by lenders; they often only recognize up to 75 percent of the expected rent based on lease agreements or appraisal rent schedules as income.

The 1 percent rule, which suggests that if monthly rent exceeds 1 percent of the purchase price, cash flow is likely to be stable, is merely a starting point for reference. In reality, it is important to also consider the cap rate, which is the net operating income divided by the purchase price, and to account for management fees if outsourced, which can take 8 to 12 percent of monthly rent, as well as setting aside about 1 percent of the asset value for maintenance costs each year. As mentioned in the tenant case earlier, whether to manage directly or outsource can significantly affect actual returns.

It is also easy to overlook the differences in coverage between standard homeowners insurance and landlord insurance. Landlord insurance includes coverage for rental loss and tenant-related liability, but the premiums are also higher. If you plan to sell this house later and move to another investment property, knowing that you can defer capital gains tax through a 1031 exchange can be beneficial.

For investors considering school districts, it is worth noting that rental demand behaves differently between areas preferred by Korean families, such as Frisco and Plano in northern Dallas, and other areas. Even within Dallas, vacancy periods and rent levels can vary significantly depending on the location.

This article is not investment or legal advice, and tax and rental laws can vary by county, so it is advisable to consult with a real estate professional and a tax advisor before entering into any contracts.