Rental cash flow.
Cap rate, cash flow
and cash on cash.
The three numbers an investor checks first on a rental, from the price, the financing, the rent and the real operating costs.
Run the numbers
Three numbers, defined
Net operating income is rent after vacancy, minus operating costs: taxes, insurance, HOA dues, maintenance and management. It leaves out the mortgage. Cap rate is a year of net operating income divided by the price, which lets you compare properties regardless of how they are financed. Cash flow is net operating income minus the mortgage payment. Cash on cash is a year of cash flow divided by the cash you put in.
I have bought and held rentals since 2009. If a property passes these numbers, the next step is checking the rent against real leases nearby and the expenses against the actual tax bill and HOA budget.
Want a second set of eyes?
Send me the address and your numbers, and I will check them against the real tax bill, HOA budget and recent sales.
Formulas: standard loan amortization. Property tax lookup: Maricopa County Treasurer and Maricopa County Assessor. Your numbers stay in your browser; nothing you type here is sent anywhere.