When you finally decide that it’s time to invest in some rental property, you will be eager to get your business started. However, you need to be certain that you carefully understand several things about investment property to make sure you can be successful in this endeavor.

The first thing you need to carefully examine is the potential for rental income from your investment property. Find out if the property is currently rented, or if it has been rented in the past. You can get the rental income numbers from your real estate agent, and then you should compare it to the current market in that area for that type of property. When you determine that previous rents have not been right on for the market, either higher or lower, then take that information into careful consideration so that you have a realistic idea of what to expect for rents.

You also need to know what the current mortgage rates are and what types of mortgages are available to you. Your specific loan details may be unique, depending on the property that you already own, your credit score, and what type of property you are trying to invest in. Investment properties have different mortgages than primary residential properties. Additionally, figure out exactly how much money you will be able to use for a down payment on the property—the more you can put down, the better interest rate you will be able to get and you will pay less interest in the long term. Many people fail to consider the huge impact that mortgage interest will have on their investment return.

Find out exactly what the taxes will be on the property. While using the tax figures from the previous year may give you a good indication of what to expect, taxes do tend to increase a little bit each year so you will have to work these numbers in. Taxes also tend to go up on a property each time it is sold because of updated assessments. Properties that have been previously owner-occupied may have had lower tax bills because of tax breaks available to the owner occupant.

If the property is vacant when you purchase it, you will need to figure in the fact that you will not instantly begin to receive rental income. There are costs associated with getting a vacant property rented—whether you are planning to show the property yourself or hire a listing agency or real estate agent. A good rule of thumb is to assume that your property will have an average vacancy rate of approximately 10%.

Tenant turnover can be costly as well. Depending on your property, there will likely be frequent turnover. Every landlord hopes that their good tenants will stay for the long term, but that is not a realistic expectation. It will cost you money each and every time that you have to re-rent a property. There will be repairs (minor or major), advertising costs, cleaning, painting or other associated costs. Collecting a security deposit from tenants can limit these costs but will not eliminate them entirely.

Insurance is a huge expense. Investment property premiums are much higher than owner occupied rates. So, even if you have a great rate for your own homeowner’s insurance, be prepared for some sticker shock when you get quotes on your investment rental property. Your liability will be higher and the risks to the insurance company are higher, hence the higher premiums.