FUNDAMENTALS

PITI Explained: The Real Monthly Cost of Your Rental

Updated March 2026

What PITI Stands For

Principal, Interest, Taxes, Insurance. It's the baseline monthly payment on a financed property. On a \$200K property with 25% down at 6.5% for 30 years: principal + interest = \$948/month, property taxes = \$333/month (at 2%), insurance = \$108/month. Total PITI: \$1,389. This is what shows up on your mortgage statement. It is not your total monthly cost.

What PITI Doesn't Include

PITI leaves out everything else: vacancy reserve, maintenance, property management, capex reserve, HOA fees, landlord-paid utilities, and lawn care. These add 30-50% to your actual monthly cost. That \$1,389 PITI becomes \$1,800-2,100 in real expenses. On a property renting for \$1,800/month, PITI makes it look like \$400/month cash flow. Real expenses make it \$0 to negative \$300.

Calculating Realistic PITI+

PITI + 5% vacancy + 8% management + 10% maintenance + 5% capex reserve = your real monthly nut. On \$1,800/month rent: vacancy \$90, management \$144, maintenance \$180, capex reserve \$90. Total reserves: \$504/month. Add to PITI (\$1,389): real monthly cost is \$1,893. Cash flow: negative \$93. That 'great deal' just became a money-loser with honest numbers.

Why This Matters for Your Purchase Decision

If you're analyzing deals using PITI as your expense baseline, every deal looks good. That's how people get burned. Always run PITI+ numbers — mortgage payment plus a realistic operating expense percentage (45-55% of gross rent). If the deal still cash flows with these numbers, you've found something real.