Run a rental property's numbers in 10 minutes
Patrick Gonsalves · · 1 min read
You don't need a spreadsheet to know whether a rental deserves a second look. You need five numbers and honest expenses.
Start with realistic income
Use market rent, not the seller's hopeful rent. Check active rentals nearby and what actually leased. Then subtract vacancy and credit loss; 5–8% is a common planning range.
Expenses people forget
- Property taxes at your purchase price, not the seller's bill
- Insurance (get a real quote)
- Repairs and maintenance, plus capital reserves for roof, HVAC, water heater and flooring
- Property management, leasing fees and turnover costs
- Utilities the owner pays (water, sewer and trash are common in multi-units)
- HOA, pest control, landscaping, pool service
The five numbers
- NOI (net operating income) = income − vacancy − operating expenses (no mortgage).
- Cap rate = NOI ÷ price. It compares properties regardless of financing.
- Cash flow = NOI − mortgage payment.
- Cash-on-cash return = annual cash flow ÷ cash you put in (down payment, closing costs, initial repairs).
- DSCR = NOI ÷ annual debt service. Many lenders want roughly 1.2 or higher for investment loans.
A quick worked example (made-up numbers)
A $320,000 duplex rents for $1,500 per side.
- Gross rent: $36,000 a year. Less 6% vacancy: $33,840.
- Expenses (tax, insurance, repairs, reserves, management, water/trash): about $12,500.
- NOI ≈ $21,340, so the cap rate ≈ 6.7%.
Whether that cash-flows depends entirely on your loan. Plug it into the rental analyzer and change the rate and down payment to see where it breaks even.
If the deal only works with zero vacancy and no repairs, it doesn't work.
Where I come in
I manage rentals every day, so my rent and expense assumptions come from real ledgers, not guesses. Send me an address and I'll give you a free investment assessment.
