(Annual Cash Flow / Total Initial Cash Invested) x 100
Usually paid by tenant, but landlords often pay water/sewer/trash. 📈 Phase 3: Key Performance Metrics Use these three formulas to see if the deal "pencils out." 1. Net Operating Income (NOI) buy and hold real estate calculator
Total Income - Operating Expenses (Do not include mortgage). (Annual Cash Flow / Total Initial Cash Invested)
Why it matters: Shows the property's intrinsic ability to generate income. 2. Cap Rate (Capitalization Rate) (Annual NOI / Purchase Price) x 100 Why it matters: Shows the property's intrinsic ability
Lender fees, title insurance, and recording fees (2–5% of price). Upfront Repairs: Costs to make the unit "rent-ready." 📉 Phase 2: Operating Expenses (Monthly)
Why it matters: This is the most critical metric. It tells you exactly what your "cash" is earning compared to a savings account or the stock market. 💡 Example Calculation $200,000 house ($50,000 total cash invested). Rent: $2,000 / month. Total Expenses + Mortgage: $1,700 / month. Monthly Cash Flow: $300. Annual Cash Flow: $3,600. Cash on Cash Return: 7.2% ($3,600 / $50,000).
Benchmark: Usually ranges from 4% to 10% depending on the market.