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Property Analysis Metrics

Learn what the different property analysis metrics mean and how they're calculated.

By Cindy1 author36 articles

70% RuleStates that the purchase price of a property should be less than or equal to 70% of its ARV, minus the rehab costs.

1% Rule (Rental Properties)States that the ratio of monthly gross rent to the purchase price should be 1% or higher.

2% Rule (Rental Properties)States that the ratio of monthly gross rent to the purchase price should be 2% or higher.

50% Rule (Rental Properties)States that operating expenses should be less than or equal to 50% of the operating income.

Vacancy ExpenseThe amount you will lose in a given time period due to vacancy.

Operating IncomeTotal income generated by a property, less the vacancy expense.

Operating ExpensesAll expenses you will pay while renting out a property, excluding loan payments.

Net Operating Income (NOI)Net income generated by a property, not accounting for loan payments.

Cash FlowThe total net amount you will receive from a rental property as income.

Post-Tax Cash FlowThe total net rental cash flow after subtracting the estimated income tax.

Total EquityThe actual portion of a property's market value that you own.

Total Profit (Rental Properties)The total cumulative profit you will receive if you were to sell a rental property.

Total Profit (Flips)The total net amount you will receive as profit from a flip.

Post-Tax Profit (Flips)The total net profit from a flip after subtracting the estimated income tax.

Total Profit (Wholesale)The total net amount you will receive as profit from a wholesale.

Post-Tax Profit (Wholesale)The total net profit from a wholesale after subtracting the estimated income tax.

Capitalization Rate (Cap Rate)A rate of return that compares the yearly NOI to the purchase price or market value.

Cash on Cash Return (COC)A rate of return that compares the yearly cash flow to the total invested cash.

Return on Equity (ROE)A rate of return that compares the yearly cash flow to your total equity in a property.

Return on Investment (ROI)The total return on your invested cash if you were to sell the property.

Internal Rate of Return (IRR)An average annualized rate of return on your invested capital.

Rent to Value Ratio (RTV, RTP)A ratio that compares the monthly gross rent to the purchase price or market value.

Gross Rent Multiplier (GRM)A ratio that shows the number of years it will take for the yearly rent to add up to the purchase price.

Equity MultipleA ratio that shows the total return on your invested cash if you were to sell the property.

Break Even Ratio (BER)The minimum occupancy needed to cover all operating expenses and loan payments.

Loan to Cost Ratio (LTC)The ratio between the loan amount and the acquisition costs of a property.

Loan to Value Ratio (LTV)The ratio between the loan amount and the market value of a property.

Debt Coverage Ratio (DCR, DSCR)A ratio that compares the yearly NOI to the yearly loan payments, often used for loan qualification.

Debt YieldA ratio that compares the yearly NOI to the total loan amount, often used for loan qualification.