Definitions, examples, formulas, and investor tips organized by category. Click any button below to jump directly to the rules.
Rules used to determine rental income strength, monthly profit, and return potential.
The rent should equal at least 1% of the purchase price.
A stronger cash flow rule where monthly rent equals 2% of purchase price.
About half of rental income may go toward operating expenses before debt.
A property should produce positive monthly cash flow after expenses and mortgage.
Measures return based on actual cash invested.
Compares monthly rent to the value of the property.
Rules landlords use for vacancy, repairs, tenant screening, and management.
Budget for time when the property is not rented.
Reserve money annually for normal property repairs.
Reserve money for major replacements like roof, HVAC, plumbing, and electrical.
Many landlords want tenants to earn at least 3 times rent.
Account for management costs even if you manage it yourself.
Tenant move-outs create vacancy, cleaning, repair, and leasing costs.
Rules used to calculate max purchase price, ARV, repairs, and profit margins.
Flippers often pay no more than 70% of ARV minus repairs.
After Repair Value is the estimated value after renovations.
Add extra repair budget for unexpected issues.
Every month you own the flip costs money.
Know how long renovated homes take to sell.
Do not renovate beyond what the area can support.
Rules for Buy, Rehab, Rent, Refinance, and Repeat strategies.
Buy, Rehab, Rent, Refinance, Repeat.
Many lenders refinance around 70% to 75% of appraised value.
Some lenders require you to own the property before refinancing.
Occurs when all original cash is pulled back out and the property still cash flows.
Rules focused on NOI, cap rate, DSCR, debt yield, occupancy, and value.
Net Operating Income is income after expenses but before debt payments.
Measures return based on NOI and property value.
Shows if income covers the loan payment.
Measures lender risk by comparing NOI to loan amount.
Shows how much income is needed to cover expenses and debt.
Multifamily investors compare price by unit.
Rules used to calculate offers, assignment fees, buyer spread, and deal safety.
Maximum Allowable Offer is the most a wholesaler should offer.
The wholesaler earns the difference between contract price and buyer price.
There must be enough margin for the end investor.
Rules used for leverage, loan approval, reserves, and financing strength.
Loan-to-Value compares loan amount to property value.
Debt-to-Income compares monthly debt to monthly income.
Lenders may require cash reserves after closing.
Investors should prepare for appraisals below contract price.
Rules used to evaluate location, demand, jobs, schools, crime, and resale value.
Location affects rent, resale, appreciation, tenant quality, and risk.
Strong employment supports rent demand and appreciation.
Local income helps determine what rents the market can support.
Crime can affect insurance, repairs, tenant quality, and vacancy.
Rules connected to equity, depreciation, tax deferral, and long-term wealth.
Allows investors to defer capital gains by exchanging into another investment property.
Investors may deduct depreciation on income-producing property.
Equity grows through appreciation, loan paydown, and improvements.
Rules that help investors avoid overleveraging, bad deals, and preventable losses.
Keep cash reserves for vacancies, repairs, and surprises.
Know several ways out before buying.
Too much debt can make a portfolio fragile.
Investors should use math, not emotion.