New landlords are often mystified as to why their income properties don’t produce any actual income. Most of the time the answer is due to a failure to recognize all of the costs. In addition to Taxes, Insurance, Maintenance, Management, and Repairs, another significant cost is the cost of capital. 

Many rental investors choose to take a loan on their properties, often in the form of a 30 year fixed rate mortgage. It is wise to understand what this money really costs.

The Loan Constant, also referred to as the Mortgage Constant or the Debt Service Constant is a financial metric that describes the actual cost of the money in terms of a percentage. The calculation is the annual debt service divided by the total loan amount.