Most investors lose money not because they bought a bad market, but because they bought a bad deal in a good market. The difference comes down to one thing: running the numbers before you make an offer.
This guide walks through the exact metrics that matter when analyzing a rental property — and how to calculate them quickly using live market data.
Cap rate (capitalization rate) tells you the return a property generates on its value, assuming you paid cash. It strips out financing so you can compare properties on a level playing field.
Net Operating Income (NOI) is your annual rent minus vacancy, repairs, and property management — but before mortgage payments. A cap rate of 6% or higher is generally considered solid in most markets. Below 4% means the property is priced for appreciation, not cashflow.
Cash on cash measures your actual return on the cash you invested — your down payment and closing costs. This is the number that matters most if you're financing the deal.
Target 8% or higher. A deal with a 10% cap rate and 4% cash on cash isn't as good as it looks — the financing is eating your return.
Monthly cashflow is what lands in your account after every expense is paid. This is the simplest gut-check metric: if the number is negative, you're subsidizing a tenant's rent out of your own pocket every month.
Target at least $200/month per door as a minimum threshold. Less than that and any surprise repair wipes out months of profit.
GRM is a quick filter for overpriced properties. Divide the purchase price by annual rent — a lower number means better value.
A GRM below 10 is generally favorable. Above 15 means you're paying a premium that's hard to justify with cashflow alone.
The formulas are simple. The hard part has always been getting accurate inputs — especially the rent estimate and the property value. Most investors either guess, use stale Zillow data, or spend hours pulling comparable listings manually.
Live rent estimates and market value comps are the two inputs that make or break an analysis. If your rent estimate is off by $200/month, every metric downstream is wrong.
| Input | Value |
|---|---|
| Purchase price | $320,000 |
| Down payment | 25% ($80,000) |
| Interest rate | 7.5% |
| Est. monthly rent | $2,200 |
| Mortgage (P&I) | $1,678 |
| Vacancy (8%) | $176 |
| Repairs (10%) | $220 |
| Monthly cashflow | +$126/mo |
| Cap rate | 5.6% |
| Cash on cash | 4.7% |
This deal is marginal — positive cashflow but below target thresholds. An investor who can negotiate the price down to $295,000 or find a property renting for $2,400 would hit the 8% CoC target.
The 2% rule says monthly rent should be at least 2% of the purchase price. It's a fast filter, not a final answer. In most major markets today, you'll rarely find 2% deals — but it's useful for quickly eliminating overpriced listings before you run full numbers.
Running these calculations manually takes time — and time kills deals. By the time you've pulled comps, modeled the numbers, and made a decision, someone else has already submitted an offer.
Propivo pulls live rent estimates and market value data for any US property and calculates every metric instantly — cap rate, cash on cash, cashflow, GRM, and the 2% rule — so you can screen deals in 30 seconds instead of 30 minutes.