Underwrite the deal—not the sales pitch.

GUIDE 01

Calculate rental cash flow without fooling yourself

Rental cash flow is not rent minus the mortgage. Start with collected rent, subtract vacancy and operating expenses to calculate net operating income, then subtract debt service. Property management should still be modeled when you plan to self-manage because your time has value and the property may eventually need professional management.

The practical sequence

1. Estimate monthly scheduled rent using supportable local evidence.
2. Reduce it for vacancy and collection loss.
3. Subtract taxes, insurance, repairs, maintenance, management, utilities paid by the owner, association fees and capital reserves.
4. Subtract monthly principal and interest to reach cash flow before income taxes.

A property that only cash-flows when vacancy, repairs and future replacements are set to zero is not conservatively underwritten. Stress the rent downward and expenses upward before deciding what to offer.

OneDEAL includes capital reserves in its modeled operating expenses. A lender may calculate NOI differently. See the cash-flow and cash-on-cash worked example →

GUIDE 02

What DSCR tells an investor—and what it does not

Debt-service coverage ratio compares a property's net operating income with its required debt payments. A DSCR of 1.30 means the modeled operating income is 1.30 times the modeled debt service. It describes debt coverage; it does not prove that the price, condition, cash invested or return is attractive.

Use DSCR alongside monthly cash flow, cash-on-cash return, break-even occupancy, liquidity after closing and upcoming capital work. Also confirm how the actual lender defines income and expenses. A calculator estimate is not a loan approval or lender quote.

Compare NOI-based DSCR with rent-to-PITIA methods →

Three useful questions

• Does the property still clear the target if rent is 5% lower?
• Does coverage survive a higher rate or insurance renewal?
• Is the return worth the cash required after lender reserves and closing costs?

GUIDE 03

The BRRRR refinance limit many analyses miss

A BRRRR refinance is commonly estimated by multiplying after-repair value by the lender's maximum loan-to-value ratio. That is only one limit. The stabilized property's income may support a smaller loan under the lender's DSCR requirement.

The smaller number determines realistic proceeds. From those proceeds, subtract the debt being paid off and refinance costs to estimate cash returned. If the deal leaves money invested, evaluate the remaining equity, monthly cash flow and return on the cash still trapped in the property instead of calling the project a failure automatically.

Work through the cash-left-in calculation →

Stress before purchasing

• Lower the final appraisal.
• Increase the rehab budget and project duration.
• Use a conservative stabilized rent.
• Increase the permanent-loan rate and closing costs.

STRATEGY LIBRARY

Follow the money through each strategy

Move from a quick definition to a complete example. Each guide shows the assumptions, explains what the result leaves out and links back to the free calculator.