Property Investment Analysis: Calculate ROI Before You Buy

Whether a rental property is a good deal comes down to four numbers:

• Cash flow — rent minus all expenses (the most important metric for buy-and-hold investors)
• Cap rate — Net Operating Income ÷ property value (the universal comparison benchmark)
• Cash-on-cash return — annual cash flow ÷ cash invested (your actual return on the money you put in)
• Total ROI — cash flow + appreciation + equity paydown over your holding period

Each metric answers a different question. Cap rate compares properties; cash-on-cash compares against other investments; total ROI measures the complete outcome.

Cash flow is rent minus every expense. Most new investors underestimate maintenance and reserves, turning apparent positive cash flow into a loss. Include all of:

• Vacancy — 5–10% of gross rent
• Property management — 8–12% of collected rent
• Property taxes & insurance
• HOA fees
• Maintenance reserves — ~1% of property value annually
• CapEx reserves — roof, HVAC, appliances (separate from routine maintenance)
• Mortgage payment — principal + interest

If a property doesn't cash flow with all reserves included, it's a liability, not an investment.

Consider a $250,000 duplex renting for $2,400/month total, with 25% down ($62,500) on a 30-year loan at 7%.

This is a solid deal — but flip one assumption (rent at $2,100 instead of $2,400) and it goes negative. Small input changes swing the outcome, which is why detailed analysis matters before you buy.

Cap rate is the standard benchmark for comparing properties. In 2026, single-family rentals typically run:

For quick screening before full analysis:

• The 1% rule — monthly rent should be ≥ 1% of the purchase price ($200k house → $2,000/mo rent). Hard to hit in expensive markets but a useful filter.
• The 50% rule — operating expenses (excl. mortgage) run ~50% of gross rent.
• The 70% rule (flips) — purchase + rehab ≤ 70% of after-repair value.

These screen deals *in or out*; always run the full numbers before committing.

Financing dramatically affects returns. Lower down payments leverage your cash further but increase monthly cost and reduce cash flow:

• 20–25% down — best rates, no PMI, conventional investor loan
• Lower down — some programs allow 15% or 10%, but tighter cash flow
• Interest-only — maximizes near-term cash flow, builds no equity
• DSCR loans — qualify on the property's cash flow, not your income
• BRRRR — Buy, Rehab, Rent, Refinance, Repeat: recycle capital by pulling equity out

Match the strategy to your goal: cash flow, appreciation exposure, or number of doors.

Before making an offer, you need NOI, cap rate, cash flow, and cash-on-cash — all with realistic reserves. If any of those four is weak, the deal is weak regardless of how the others look.

The Property Investment Analyzer on Adept.club computes all four metrics, models financing scenarios, and benchmarks against market cap rates. Free, no sign-up.