Real estate can be a powerful way to build long-term wealth, but every great investment starts with the numbers. After more than eight years in property management, I've seen how the right analysis up front protects investors from costly surprises. Here are five numbers to know before you buy.
1. Market Rent
Base your estimate on comparable rentals nearby, not on what you hope to charge. Look at similar size, condition, and location.
2. Operating Expenses
Include property taxes, insurance, maintenance, property management, HOA dues, and any utilities you'll cover. Many new investors underestimate maintenance, so budget conservatively.
3. Net Operating Income (NOI)
NOI = annual rent − vacancy − operating expenses. This shows what the property earns before your mortgage payment.
4. Cap Rate
Cap rate = NOI ÷ purchase price. It's a quick way to compare properties regardless of how they're financed.
5. Cash-on-Cash Return
Cash-on-cash return = annual cash flow ÷ total cash invested (down payment, closing costs, and repairs). This tells you how hard your money is working.
Don't Forget Reserves
Set aside funds for vacancies and big-ticket items like a roof, HVAC, or water heater. Reserves are what keep a good investment from becoming a stressful one.
Let's Run the Numbers Together
Whether you're buying your first rental or growing your portfolio, I'll help you evaluate properties with an investor's eye and a property manager's experience. Request my free Investor Guide on the Invest page or let's talk strategy.
This post is for general information only and is not financial or tax advice.
