Thinking about buying your first rental in Lubbock but not sure how to run the numbers? You are not alone. Between Texas Property Code requirements, seasonality tied to Texas Tech University, and West Texas insurance considerations, it helps to follow a simple, local playbook. This guide gives you a step-by-step worksheet you can copy, with Lubbock-specific tips to estimate rent, expenses, vacancy, and returns with confidence. Let’s dive in.
Why Lubbock rental demand is durable
Lubbock’s rental market is anchored by Texas Tech University, which drives steady demand for 1–3 bedroom homes and apartments close to campus. Health care employment from University Medical Center, Covenant Health, and related clinics adds a strong base of workforce renters. Agriculture, manufacturing, and regional services round out a stable job mix.
You will find opportunity across single-family rentals, duplexes and quadplexes, small garden apartments, and off-campus student housing. For most small investors, single-family and 2–10 unit multifamily offer the best balance of access and returns. Areas near Texas Tech, the medical centers, and major employment corridors typically see the strongest leasing velocity, while suburban subdivisions often attract long-term family renters.
Seasonality matters. Peak leasing runs May through August, with many move-ins in July and August. Fall and winter are slower, especially for student-oriented properties, so you should underwrite slightly higher vacancy for those units outside peak season.
Step 1: Estimate market rent
Start with local comps and adjust for differences so your model reflects what tenants will actually pay.
- Gather 5–10 comparable rentals leased or listed in the last 3–6 months. Match property type, bedrooms, bathrooms, square footage, and neighborhood.
- Adjust for key factors:
- Size using rent per square foot.
- Bedroom and bathroom count.
- Condition and amenities like renovations, appliances, central A/C, in-unit laundry, parking, or yard.
- Furnished versus unfurnished. Many student units command a premium when furnished.
- Utilities included. Compare gross rent to tenant-paid arrangements.
- HOA rules and pet policies that may influence demand.
- Use the median of adjusted comps as your market rent. For conservative underwriting, also test rent at minus 5 percent and minus 10 percent.
Student vs workforce nuance: Student rentals can achieve higher per-bed pricing using a roommate model, but expect higher turnover, more advertising, and more wear-and-tear. Workforce and family rentals often trade slightly lower on a per-bed basis but benefit from longer lease terms and lower turnover costs.
Step 2: Set vacancy and turnover
Vacancy assumptions drive your Effective Gross Income, so align them with Lubbock’s seasonality.
- Typical vacancy allowance: 5–10 percent.
- For student-oriented properties, use 8–10 percent to reflect winter slowdowns and peak-season turns.
- For workforce and family rentals, 5–7 percent is common if the property is well located and marketed.
- Include a turnover cost per move-out. A reasonable range is 500 to 2,000 dollars per turnover for single-family homes, with student houses often requiring more frequent touch-ups or furnishings.
Step 3: Build your expense budget
Track each line item and use conservative estimates until you have hard quotes or historicals.
Property taxes
Texas relies on property taxes to fund local services. Underwrite using the most recent rate and assessed value from the Lubbock Central Appraisal District. Calculate taxes as assessed value multiplied by the combined tax rate for the applicable taxing entities. If you expect a post-purchase reassessment, model a range so you are not surprised.
Insurance
Budget for West Texas wind and hail risk. For single-family homes, a common underwriting range is 0.25 to 0.75 percent of property value per year, but you should obtain local quotes. Older roofs or large structures can push premiums higher.
Utilities
If the landlord pays any utilities, build those costs in. Water, sewer, and trash are the most common. Electricity and gas are typically tenant-paid in single-family homes. Expect higher thermostatic usage in summer months when A/C runs more often.
Repairs, maintenance, and reserves
Set aside funds for both routine upkeep and capital replacements.
- Maintenance reserve: often 5–10 percent of gross rent for small multifamily, or 1,200 to 2,000 dollars per unit per year for single-family homes.
- Capital expenditures: 250 to 500 dollars per unit per year as a baseline, or 5–10 percent of gross for older properties or those needing upgrades.
Property management
If you plan to hire a manager, budget 8–12 percent of collected rent. Single-property engagements may sit on the higher end of that range, while small portfolios or multifamily can sometimes secure lower fees.
Other line items
Include advertising, leasing fees, screening, legal, accounting, HOA dues if applicable, and any on-site services. Add a small contingency until you have more precise quotes.
Step 4: Run the math
A simple workflow keeps your analysis repeatable and comparable across deals.
Key formulas
- Gross Scheduled Rent (GSR) = sum of all monthly rents × 12
- Effective Gross Income (EGI) = GSR − vacancy and credit loss + other income
- Operating Expenses = taxes + insurance + landlord-paid utilities + maintenance + management + HOA + advertising + reserves
- Net Operating Income (NOI) = EGI − Operating Expenses
- Cap Rate = NOI ÷ purchase price
- Debt Service = annual mortgage payments
- Cash-on-Cash Return = (NOI − Debt Service) ÷ cash invested
- Debt Service Coverage Ratio (DSCR) = NOI ÷ Debt Service
- Gross Rent Multiplier (GRM) = purchase price ÷ GSR
Typical ranges to test
- Vacancy allowance: 5–10 percent overall; higher for student-oriented units in off-peak months.
- Management fee: 8–12 percent of collected rents.
- Maintenance and capex reserves: 5–10 percent of gross rent or 250–500 dollars per unit per year.
- Insurance: start with 0.25–0.75 percent of value and adjust with quotes.
- Cap rates in secondary Texas markets vary by asset class and risk, often in the mid single digits to low double digits. Always compare to recent local comps.
Lender checkpoints
Many lenders target DSCR of 1.2 to 1.35 or higher. If your DSCR is tight, test a lower rent scenario or a higher interest rate to see if the deal still works.
Copyable worksheet template
Use this as a starting point. Replace placeholders with your numbers.
- Property info: address, unit mix, beds/baths, square footage, year built, lot size, condition.
- Rent comps: source 5–10 comps; note adjustments for size, amenities, furnishings, utilities.
- Market rent per unit: ________ per month; GSR = monthly total × 12 = ________.
- Vacancy %: ________; Vacancy loss = GSR × % = ________.
- Other income (parking, laundry, pet, storage): ________.
- EGI = GSR − Vacancy loss + Other income = ________.
- Operating expenses
- Taxes: ________
- Insurance: ________
- Utilities (landlord): ________
- Repairs and maintenance: ________
- Management (8–12%): ________
- HOA/Advertising/Screening/Legal/Accounting/Reserves: ________
- Total Operating Expenses: ________
- NOI = EGI − Operating Expenses = ________.
- Purchase price: ________; Closing costs: ________; Immediate rehab: ________.
- Financing: LTV ________; interest rate ________; term ________ years; Annual Debt Service = ________.
- Cash invested = down payment + closing costs + immediate rehab = ________.
- Cap Rate = NOI ÷ purchase price = ________.
- Cash-on-Cash = (NOI − Debt Service) ÷ Cash invested = ________.
- DSCR = NOI ÷ Debt Service = ________.
Sensitivity check:
- Test rent at −10%, base, +10%.
- Test expenses at +10%, base, −10%.
- Record impacts on NOI, Cap Rate, Cash-on-Cash, and DSCR to see your margin of safety.
Leasing and timing tips
Align your marketing with Lubbock’s leasing cycles to cut vacancy and boost rent.
Student rentals
- List early. Start advertising in May–July for August move-ins.
- Consider furnished options and per-bed pricing if layout supports roommates.
- Set clear house rules that align with city noise ordinances and any HOA standards.
Workforce and family rentals
- Market year-round, with higher activity in summer.
- Highlight practical features such as parking, storage, yard space, and proximity to daily needs.
- Offer longer lease options to reduce turnover costs.
Local rules and due diligence
Texas Property Code governs landlord-tenant relationships, including habitability, notices, security deposits, and evictions. There is no statewide cap on deposit amounts, but you must follow required notice and court procedures for evictions. The City of Lubbock may enforce nuisance and property standards and may require permits for certain work. Student-focused landlords should be mindful of noise rules and any community association restrictions.
Due diligence checklist:
- Title and deed review, including easements and liens.
- Property tax history via the appraisal district; review assessment changes and any protests.
- Insurance claims history; verify FEMA flood zone status even though coastal risk is low.
- Utility history, with attention to summer A/C usage.
- Rent roll, leases, security deposits, and payment history for income assets.
- Full physical inspection and contractor bids for required work.
- Comparable rents and recent sale comps via local MLS and property managers.
- For student housing, confirm lease timing, occupancy patterns, and any university off-campus housing rules.
Next steps
When you have a target property, plug its numbers into the worksheet, then tighten your model with hard data: an actual tax bill, a current insurance quote, utility statements, and verified rent rolls. Test a downside rental scenario and a higher expense case to confirm the deal still meets your goals.
If you want local comps, lease-up guidance, or a second set of eyes on your underwriting, connect with the team at Bray Real Estate Group. We help investors source opportunities, validate rents through MLS and on-the-ground intel, and coordinate trusted partners for management, lending, title, inspections, and contractor bids.
FAQs
How do I estimate rent near Texas Tech?
- Pull 5–10 recent comps for similar beds, baths, size, and proximity, then adjust for furnishings, utilities, and amenities; use the median adjusted rent and test minus 5–10 percent for safety.
What is a good cap rate in Lubbock?
- It depends on asset class and risk, but secondary Texas markets often trade in the mid single digits to low double digits; compare your cap rate to recent local comps for a fair benchmark.
How much vacancy should I model for student rentals?
- Use 8–10 percent to reflect higher turnover and slower winter leasing, and plan peak-season turns in May–August.
How are property taxes calculated for Lubbock rentals?
- Multiply the assessed value by the combined tax rate for the applicable taxing entities; verify both through the local appraisal district and model a range for potential reassessment.
What DSCR do lenders want for Lubbock rentals?
- Many lenders look for DSCR of at least 1.2 to 1.35; if your ratio is tight, test lower rents or higher rates to see if the deal still qualifies.
