Know the numbers before you buy
Guides to rentals, flips, BRRRR and short-term rentals, with every number shown.
News
What changed for people buying rentals and flips, and what it does to the numbers.
The Fed holds rates at 3.75% to 4%, with two votes for an increase
On October 28, 2026, the Federal Reserve left the target range for the federal funds rate at 3.75% to 4%, voting 10 to 2, and said inflation remains elevated. Rates that track it, such as most home equity lines, stay where they are. For example, interest on a $50,000 line at 8% stays at about $333 a month.
Mortgage rates jump a quarter point to 7.28%, the highest since 2023
Freddie Mac’s weekly survey put the average 30-year fixed mortgage rate at 7.28% on October 1, 2026, up from 7.03% a week earlier and the highest reading since November 2023. A quarter point adds about $38 a month to a $225,000 loan. For example, that is enough to turn a rental earning $24 a month into one losing $14.
Getting started
Your first rental, from the cash you need to the numbers to check before an offer.
One $250,000 rental explains ten terms: 8.4% cap rate, $420 a month
These terms all describe the same house from different angles: what it earns, what it owes and what you get back. In this example a $250,000 rental at $2,750 a month shows every one of them, from $420 of monthly cash flow to an 8.4% cap rate and a 1.32 DSCR.
Nothing down still leaves $20,730 to find, and the house loses $87 a month
No conventional loan finances all of a rental: 85% of the price is the most, so 15% down is the floor. In this example a 100% loan would still leave $20,730 of closing costs and reserves to find, and the house would lose $87 a month.
Rentals
Cash flow, returns and the costs that decide whether a rental pays.
This rental clears $420 a month, $5,043 a year before tax
There is no average landlord, so look at the national totals and then at one house. For 2023 the IRS counted $436.7 billion of rents received against $414.8 billion of expenses, and in this example a $250,000 rental clears $420 a month, $5,043 a year before tax.
Every $100 of HOA dues takes $17,143 off this condo’s value
A condo can work as a rental, and the monthly dues decide most of it. In this example a $250,000 condo renting for $2,750 leaves $229 a month with $250 of dues and $29 with $450, and every $100 of monthly dues takes $17,143 off what the unit is worth at a 7% cap rate.
Loans and down payments
What lenders ask for, and how the loan changes the deal.
Fannie Mae stops at ten financed properties. The tenth needs $111,846.
Fannie Mae’s rules allow up to ten financed one- to four-unit properties when the new loan is for a rental or a second home. The count is the easy part. In this example the fifth rental asks for $40,306 in reserve and the tenth asks for $111,846.
Paying off this rental frees $15,967 a year. Only $11,884 is a return.
Paying off a rental raises its cash flow, and what the money earns is the loan’s interest rate, nothing more. In this example a $171,625 check ten years into a $250,000 rental lifts cash flow from $420 to $1,751 a month and avoids $11,884 of interest in the first year.
BRRRR
Buy, rehab, rent, refinance, repeat, and how much cash comes back.
A rehab loan put $26,350 into this house; the BRRRR needed $160,600
Not with FHA’s 203(k), which insures only a home you occupy. Fannie Mae’s HomeStyle Renovation allows a one-unit investment property, and in this example one 85% loan across $155,000 of price and work takes $26,350 of cash and leaves $411 a month.
A $35,000 rehab turned $160,600 into $200,000. That gap is forced appreciation
Forced appreciation is the gap between what a property is worth when you are finished and what it cost you to get there. In this example a house that cost $160,600 all in appraises at $200,000, so $39,400 of value was created rather than waited for.
Flipping
Buying, fixing and selling, with every cost counted before the profit.
A HELOC cuts this flip’s loan costs from $12,075 to $7,331
Yes, if your home has the equity and your lender allows it. In this example, a HELOC at 8.5% with no points instead of hard money at 10% with 2 points cuts the cost of the money from $12,075 to $7,331 and lifts profit from $37,525 to $42,269. Your home secures the debt.
An inherited house nets $211,600 as-is. A $45,000 fix nets $204,400.
Compare the cash each route leaves after selling costs, the repairs and the months you hold the house. In this example selling as-is nets $211,600, while spending $45,000 and selling four months later at $275,000 nets $204,400, so fixing it only pays above about $282,826.
Short-term rentals
Airbnb and nightly rentals: fees, bookings and what’s left.
This arbitrage apartment needs $210 a night to cover a $2,400 lease
Airbnb arbitrage is leasing a home and renting it out by the night, which takes your landlord’s permission first. In this example a one-bedroom leased at $2,400 and listed at $175 a night loses $549 a month at 65% booked, and needs $210 a night to break even.
This Airbnb takes in $88,969 a year and keeps $9,934 of it
Airbnb’s own figure for the typical US host is $15.6K earned in 2025, and three in four hosts list one home for a few days a month. A house bought to run as a short-term rental is a different business: in this example it takes in $88,969 a year and keeps $9,934 after every cost.
Duplexes and small buildings
Two to four units and up, rent rolls, and living in one unit.
The same fourplex: 8.9% borrowed at $499,000, and a loss at $700,000
Negative leverage is borrowing at a cost higher than the building earns, so the loan lowers your return instead of lifting it. In this example a fourplex pays 8.9% on borrowed money at $499,000 and loses 4.1% a year at $700,000, where its 5.4% cap rate sits under the 8.0% the loan costs.
$150 more a unit added $78,171 to this fourplex’s value
Value add means raising a building’s net operating income, because a building is priced off its income rather than off what similar houses sold for. In this example, $150 more a unit on a fourplex adds $5,472 a year of net income, worth $78,171 at a 7% cap rate, and monthly cash flow goes from $849 to $1,305.
Taxes and rules
The IRS and local rules that change the numbers.
This rental banks $3,864 a year and reports a $2,274 loss
Often yes, up to a point. A rental loss is passive, so you can take up to $25,000 of it against ordinary income if you actively participate, and that allowance shrinks to nothing between $100,000 and $150,000 of income. In the example below, a house that banks $3,864 reports a $2,274 loss.
A 1031 exchange moved $140,836 into a fourplex and left $26,066 exposed
A 1031 exchange lets you move the proceeds of one investment property into another and defer the tax on the gain, if you identify the replacement in 45 days and close in 180. In the example a $140,836 sale buys a fourplex that needs $114,770, so $26,066 stays taxable.