In this guide
- The only order that works: numbers first, property second
- NOI: the number everything else stands on
- Cap rate vs cash-on-cash: two questions, two tools
- Financing: DSCR is the gatekeeper
- Reserves: the difference between investors and gamblers
- BRRRR: recycling capital
- Flips and wholesale: exit math first
- Taxes: where rentals quietly win
The only order that works: numbers first, property second
Falling in love with a property before running numbers is the classic first-deal mistake. Screen with GRM or the 1% rule (monthly rent ≈ 1% of price is a rough cash-flow signal in many markets), then underwrite fully with the rental property analyzer — cap rate, cash flow, cash-on-cash, and DSCR in one pass.
NOI: the number everything else stands on
Net operating income is rent minus real operating costs — vacancy, taxes, insurance, maintenance, management — before the mortgage. Sellers’ pro formas chronically understate expenses; long-term rentals typically run 35–50% operating expense ratios. Rebuild NOI yourself with the NOI calculator before trusting anyone’s listing.
Cap rate vs cash-on-cash: two questions, two tools
Cap rate compares properties independent of financing; cash-on-cash measures the return on your actual cash once the loan exists. Use both — a great building with bad financing is a bad investment. See the full distinction in cap rate vs ROI.
Financing: DSCR is the gatekeeper
Investment lenders underwrite the property’s income: DSCR of 1.20–1.25 is the common floor. Before shopping, run the DSCR calculator — it tells you the maximum loan the income supports, which sets your real budget faster than any pre-approval.
Reserves: the difference between investors and gamblers
Vacancy (5–8%), maintenance (5–10% of rent), and CapEx reserves are not optional. A deal that only works at zero vacancy with no repairs is a coin flip, not an investment. Set reserves with the reserve calculator and stress-test with vacancy loss.
BRRRR: recycling capital
Buy under market, force value with rehab, rent, then refinance at the new value to pull capital back out — BRRRR. The whole strategy lives or dies on the ARV estimate and the refinance LTV. Model the full cycle with the BRRRR calculator and keep a margin of safety on ARV.
Flips and wholesale: exit math first
Flippers work backward from ARV using the 70% rule — maximum offer ≈ 70% of ARV minus rehab (cash offer calculator). Budget rehab with contingency (rehab budget), price the money (hard money), and verify profit after all costs with the flip profit calculator. Thin deals on paper become losses in practice.
Taxes: where rentals quietly win
Depreciation shelters rental income; 1031 exchanges defer gains at sale; recapture is the eventual bill. Model the after-tax picture with the rental tax calculator — for many investors the tax treatment is half the return.
Reviewed July 2026 · Formulas and 2025 tax figures per the methodology page. Educational content, not financial advice.