DealCheck

Cindy Bellford

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

Property Analysis Metrics

The total amount of cash you will need to purchase and rehab a property.

Total Cash Needed

The total amount of capital you have invested in a property.

Total Cash Invested

Property Purchase

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

70% Rule

States that the ratio of monthly gross rent to the purchase price should be 1% or higher.

1% Rule (Rental Properties)

States that the ratio of monthly gross rent to the purchase price should be 2% or higher.

2% Rule (Rental Properties)

States that operating expenses should be less than or equal to 50% of the operating income.

50% Rule (Rental Properties)

Purchase Criteria

The principal and interest (or interest only) payments required to repay your loan, excluding any escrow payments.

Loan Payments

The portion of the loan payment that goes toward paying the interest on the loan.

Loan Interest

Financing

Estimated ARV based on the average sale price of comps and a property's living area.

Calculated ARV Estimate

Estimated gross rent based on the average listed rent of comps and a property's living area.

Calculated Rent Estimate

Valuation

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

Vacancy Expense

Total income generated by a property, less the vacancy expense.

Operating Income

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

Operating Expenses

Net income generated by a property, not accounting for loan payments.

Net Operating Income (NOI)

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

Cash Flow

The total net rental cash flow after subtracting the estimated income tax.

Post-Tax Cash Flow

Cash Flow (Rental & BRRRR Properties)

A common income tax deduction available to real estate investors.

Depreciation

Depreciation (Rental & BRRRR Properties)

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

Total Equity

The total cumulative profit you will receive if you were to sell a rental property.

Total Profit (Rental Properties)

The total net amount you will receive as profit from a flip.

Total Profit (Flips)

The total net profit from a flip after subtracting the estimated income tax.

Post-Tax Profit (Flips)

The total net amount you will receive as profit from a wholesale.

Total Profit (Wholesale)

The total net profit from a wholesale after subtracting the estimated income tax.

Post-Tax Profit (Wholesale)

Property Sale

A rate of return that compares the yearly NOI to the purchase price or market value.

Capitalization Rate (Cap Rate)

A rate of return that compares the yearly cash flow to the total invested cash.

Cash on Cash Return (COC)

A rate of return that compares the yearly cash flow to your total equity in a property.

Return on Equity (ROE)

The total return on your invested cash if you were to sell the property.

Return on Investment (ROI)

An average annualized rate of return on your invested capital.

Internal Rate of Return (IRR)

Investment Returns

A ratio that compares the monthly gross rent to the purchase price or market value.

Rent to Value Ratio (RTV, RTP)

A ratio that shows the number of years it will take for the yearly rent to add up to the purchase price.

Gross Rent Multiplier (GRM)

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

Equity Multiple

The minimum occupancy needed to cover all operating expenses and loan payments.

Break Even Ratio (BER)

The ratio between the loan amount and the acquisition costs of a property.

Loan to Cost Ratio (LTC)

The ratio between the loan amount and the market value of a property.

Loan to Value Ratio (LTV)

A ratio that compares the yearly NOI to the yearly loan payments, often used for loan qualification.

Debt Coverage Ratio (DCR, DSCR)

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