Help and definitions

Money in and money out

The monthly arithmetic underneath every rental answer.

What is left each month after rent comes in and vacancy, operating costs, reserves, and the mortgage go out. Positive means the property pays you. Negative means you pay it.

The headline number on every rental strategy.

Rent you actually collect, not rent on paper. It is the full rent minus an allowance for the months the unit sits empty.

Income after vacancy, the first row of the monthly ledger.

Everything the property costs to run whether or not there is a loan on it: taxes, insurance, maintenance, management, HOA, utilities you cover. The mortgage is not an operating expense.

Second row of the monthly ledger.

Effective gross income minus operating expenses. It is what the building earns before any lender is paid, which is why it is the number used to compare properties with different financing. DealLevel counts the CapEx reserve and property management as operating expenses, so its NOI is more conservative than a broker's, which often leaves the reserve out.

The ledger, and the input to cap rate and DSCR.

The mortgage payment itself: principal plus interest. Taxes and insurance are counted separately here even if your lender escrows them into one payment.

Mortgage payment (P&I) in the ledger.

The one-time fees to buy: lender charges, title, appraisal, recording, prepaid items. Usually a few percent of the price, and they come out of your pocket rather than the loan.

Total cash invested.

What the property costs you per month while nobody is paying rent: taxes, insurance, utilities, and loan interest during a renovation or a sale.

Fix and flip, and the BRRRR renovation period.

Money set aside each month for the things that fail once a decade rather than once a year: the roof, the HVAC, the water heater, the appliances. It is not maintenance, and leaving it out is the most flattering thing you can do to a rental on paper.

Operating expenses, on every rental strategy.

Every dollar of your own money the deal consumes: down payment, closing costs, renovation, and furnishing. It is the denominator of your return, so getting it wrong flatters every percentage on the page.

The summary strip.

Returns

Four ways of asking the same question: was this a good use of the money?

Yearly net operating income divided by the property value. It deliberately ignores your loan, which is what makes it useful for comparing two properties financed differently.

The summary strip, on every rental strategy.

A year of cash flow divided by the cash you actually put in. Unlike cap rate it does count your financing, so a bigger loan raises it and a bigger down payment lowers it.

The summary strip.

One annualized percentage covering the whole hold, and the only return here that cares when money moves. A dollar back in year one is worth more than a dollar back in year fifteen, and this is the number that says so.

The 30-year projection.

Profit divided by the cash you invested, across the whole project rather than per year. On a flip this is the headline.

Fix and flip results.

The same return stretched or compressed to a yearly rate, so a six-month flip and a two-year flip can be compared honestly.

Fix and flip results.

Net profit as a share of the sale price. A thin margin means small errors anywhere in the budget eat the whole profit.

Fix and flip results.

Risk and lending

What a lender looks at, and what breaks a deal quietly.

Net operating income divided by the mortgage payment. Above 1.0 means the property covers its own loan. Most lenders want 1.20 or better, because 1.0 exactly means no room for a single bad month.

The summary strip. Shows as 'No debt' on an all-cash purchase.

The loan as a share of what the property is worth. A 75% LTV refinance on a $200,000 valuation is a $150,000 loan, and the appraisal is what decides that valuation, not your estimate.

BRRRR refinance inputs.

A fee charged as a percentage of the loan, paid up front. Two points on a $150,000 loan is $3,000, and on a short flip that lands entirely on this one project.

Fix and flip financing.

The share of the year you assume the unit sits empty between tenants. Most markets run 5 to 10 percent. Assuming zero is the single most common way a beginner's spreadsheet lies to them.

Rental assumptions, and often the number named under What breaks it.

Value and rules of thumb

Fast screens. None of them is a substitute for the full arithmetic.

What the property is expected to be worth once the planned renovation is finished. Every flip and every BRRRR rests on this number, and it is an estimate, not a fact, until an appraiser agrees with it.

Fix and flip and BRRRR inputs.

A screen, not an answer: monthly rent of at least 1% of the purchase price. It was a useful filter in a cheaper market and it fails badly in expensive ones. Treat a miss as a reason to look closer, not to walk.

Buy and hold metrics.

Do not pay more than 70% of the after repair value minus the renovation budget. It is the flip world's standard sanity check, and it exists to leave room for the costs beginners forget.

Fix and flip, as a pass or fail gate.

The point at which one assumption stops working: the rent, the sale price, or the occupancy at which the deal turns from yes to no. This is what 'What breaks it' names for you.

The answer panel, on every strategy.

Moving one assumption at a time to see how far it can slip before the answer changes. A deal that survives a 10% rent miss is a different deal from one that does not.

The stress test tab. Part of Pro.

Short-term rental

Nightly letting has its own vocabulary and its own failure mode.

What you charge per booked night, averaged across the year. Your peak-season rate is not your average nightly rate.

Short-term rental inputs.

The share of nights in the whole year that are booked, including the slow months. Most hosts land between 50 and 65 percent. This is the assumption that sinks most short-term rentals.

Short-term rental inputs.

Nightly rate multiplied by occupancy. It is the honest version of the nightly rate, because it counts the empty nights the headline rate ignores.

Short-term rental assumptions.

BRRRR

Buy, renovate, rent, refinance, repeat. The question is how much cash comes back.

Purchase price plus renovation plus holding costs. The total the property has cost you by the time it is rented and ready to refinance.

BRRRR results.

What is still tied up in the deal after the refinance hands money back. The whole point of a BRRRR is to make this small. At zero, your return is infinite because you have none of your own money in it.

The BRRRR headline number.

After repair value minus all-in cost. The value the renovation added rather than the value the market handed you.

BRRRR results.