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Real estate investing resources

Whether you're analyzing your first deal or brushing up on the numbers, these guides explain how rental property math works — in plain English.

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Deal Metrics

What is DSCR (Debt Service Coverage Ratio)?

DSCR measures whether a property generates enough income to cover its loan payments. Formula: DSCR = Annual NOI ÷ Annual Debt Service Example: Annual NOI = $15,000 Annual debt service = $12,000 DSCR = 1.25 Interpretation: - above 1.0 means the property produces enough income to cover the debt - below 1.0 means the property does not fully cover the debt - many lenders like to see 1.2 or higher Why this matters: DSCR answers the simple question: does the property make enough to pay the loan? It helps you see how much room there is if income drops or expenses rise.

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Deal Metrics

What is NOI (Net Operating Income)?

NOI is the income a property produces after operating expenses are removed, but before the mortgage is applied. Formula: NOI = Effective Gross Income − Operating Expenses Example: Rent = $2,000/month Vacancy = $100/month Effective Gross Income = $1,900/month Operating expenses = $650/month NOI = $1,250/month Why this matters: NOI shows the property's income before financing. It's useful because it isolates the property performance independent of loan terms and is used in cap rate and DSCR.

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Deal Metrics

What is cap rate?

Cap rate measures how strong a property is without looking at financing. Formula: Cap Rate = Annual NOI ÷ Purchase Price Example: Monthly NOI = $1,250 Annual NOI = $15,000 Purchase price = $220,000 Cap rate = $15,000 ÷ $220,000 = 6.8% Why this matters: Cap rate helps compare properties on their own income vs price, before loans change the picture.

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Deal Metrics

What is cash-on-cash return?

Cash-on-cash return tells you how hard your invested cash is working. Formula: Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested Example: Down payment = $40,000 Closing costs = $6,000 Initial repairs = $9,000 Total cash invested = $55,000 Annual cash flow = $3,600 Cash-on-cash return = $3,600 ÷ $55,000 = 6.5% Why this matters: This helps you compare how efficiently your upfront cash is earning income. Two deals can have the same cash flow but very different cash required; this metric makes that clear.

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