Evaluate rental income, cash flow, cap rate, and ROI before buying an investment property.
Investment Property Analyzer — coming soonCash flow is the foundation
A rental property “works” when rent covers operating expenses, vacancy, maintenance, property management, taxes, insurance, and debt service — with margin left over. Negative cash flow can be acceptable only if you deliberately subsidize for appreciation, and only if you can sustain it for years.
Start with gross rent minus realistic vacancy (often 5–10%), then subtract taxes, insurance, HOA, maintenance reserves, and management fees. Compare the result to your monthly mortgage payment on the investment loan.
Cap rate and cash-on-cash return
Cap rate = net operating income ÷ purchase price. It ignores financing and helps compare properties. Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested (down payment + closing costs). Many investors target 8–12%+ cash-on-cash, though markets differ.
Also stress-test: what if rent drops 10% or you have a six-month vacancy? Properties that only work in perfect conditions are risky. Our upcoming Investment Property Analyzer will model these metrics automatically.
Beyond the spreadsheet
Factor in time, tenant risk, capital repairs (roof, HVAC), and local landlord regulations. Appreciation can boost returns but should not rescue a deal with poor day-one cash flow unless that is your explicit strategy.
Use conservative rent estimates from comparable listings, not the seller’s pro forma. When our Investment Property Analyzer launches, you will be able to model cash flow, cap rate, and ROI in one place — for now, sketch the numbers manually and compare against your target return.
Ready to run the numbers for your situation?
Investment Property Analyzer — coming soon