TOOLS / RENTAL ANALYSIS
Rental analysis
Cap rate, cash-on-cash, debt service coverage, and the point where a rental stops working.
The property
Financing
$41,250 down
Operating
No homestead exemption on a rental.
Roof, HVAC, water heater. They all die eventually.
Put a number here even if you self-manage. Your time is not free.
Negative cash flow
-$2,068
-$172 a month, on $56,250 of your own money.
Cap rate4.5%
Cash on cash-3.7%
Debt service coverageLenders on investment property usually want 1.20 or better0.80
The year
Gross rent$19,800
Vacancy at 8%− $1,584
Property taxes− $3,400
Insurance− $2,200
Maintenance at 8%− $1,584
Capital reserves at 5%− $990
Management at 10%− $1,980
Net operating income$8,062
Debt service− $10,130
Cash flow-$2,068
Quick screens
Rent to priceThe old one percent rule. Rare now, but useful as a first filter.1.0%
Rent you need to break evenCovers operating costs and debt service, nothing more$1,900
Debt service coverage below 1.20 is where investment lenders start saying no, and it is also where one bad month turns into money out of your pocket.
The line people leave out is capital reserves. A roof does not fail gradually, it fails once, and if you have not been setting money aside for eleven years it comes out of somewhere else. Leaving it at zero makes any rental look good.
Rents and expenses in East Texas vary block to block. These are your assumptions, so change them until they match what you can actually verify.
This is a planning estimate, not an offer, an appraisal, a quote, or a commitment. Everything runs in your browser: no figure you type here is sent anywhere or stored.