Real estate is math wearing a tie. The deal that 'feels right' is usually the one that pencils out — and the rest are emotional traps.
This used to be a back-of-the-envelope job. Now it is one tap, but the logic has not changed. Real estate is math wearing a tie. The deal that 'feels right' is usually the one that pencils out — and the rest are emotional traps.
Net operating income / property price. Apples-to-apples comparison across deals.
Annual cash flow / cash invested. What your money actually earns each year.
Monthly rent should equal at least 1% of purchase price. Quick screening filter.
NOI / debt service. Lenders need 1.20+ typically.
Internal rate of return — accounts for time of cash flows.
Set aside 5–15% of rent for capital expenses (roof, HVAC).
Budget 5–10% vacancy — even in hot markets.
Cost of refinance / monthly savings = months to break even.
What's a good cap rate? 5–10% depending on market and risk. Above 12% usually means hidden problems.
Are turnkey rentals worth it? Easier, lower margin. Real wealth often comes from value-add deals.
The math is the easy part. Acting on what it tells you is where the real win lives.