How one Texas investor boosted profit by cutting expenses

Financing is his largest expense. Over the past year, he refinanced several properties when rates dipped, locking in new 30-year loans. "I moved some of those notes from 7.5% – one down to 5.3%, and several of them at 5.9%," he said. The lower rates reduced interest costs and let him increase principal paydown. "Because that rate went down by 2%, I'm getting an increased return on the capital that I'm using because I'm now paying more principal per month," he said on his channel.

Next, Potts started paying closer attention to property taxes. He initially thought he had to accept the appraised value set by his local appraisal district. Over time, he learned how to file a protest and make a case for a lower valuation. In 2022, property taxes consumed 16.6% of his rental revenue. By 2024, that fell to about 15%. Today, "my property tax bill represents 11.7% of my revenues." He stopped accepting the appraised value and "became proactive," he said.

Potts also reduced insurance costs. They once accounted for about 6.2% of rental revenue; now they represent about 5.2%. His first move was raising his deductibles from 1% to 5%. Because he already had a substantial cash reserve for repairs and vacancies, he decided he didn't want to pay higher premiums for smaller losses. "I really just wanted to insure for something catastrophic," he said. He also began shopping his policies more aggressively, using a broker who can compare policies from multiple insurers rather than an agent who represents only a few.

Potts has learned he can't count on rising rents to improve returns. Lowering expenses is another part of the equation. He identifies cost-cutting opportunities through "common size analysis," a technique that converts dollar amounts into percentages relative to a base figure. He tracks each property's rental income and expenses, then calculates how much of its revenue goes toward categories such as taxes and insurance. That makes it easier to spot outliers. If property taxes consume 19% of the revenue from one property but substantially less at another, he investigates why. "A good operator is looking at revenues, expenses, the financing piece – they're looking at all of them," he said. "Common sizing helps to show it."