Property investment analysis: will this rental make money?
A listing that looks like a great deal can lose money once you add vacancy, repairs and a realistic rent. Send your agent the property and your financing, and it runs a property investment analysis: rent comparables with links, full expenses, monthly cash flow, cap rate and cash-on-cash return, plus what happens if rates or rent move against you.
The prompt
- Analyse this property as a buy-to-let investment: [LISTING LINK OR DETAILS]. Purchase price [PRICE], my down payment [DOWN PAYMENT], loan rate [INTEREST RATE] over [LOAN TERM], closing and rehab costs about [UPFRONT COSTS]. Research rents for similar units nearby with links and suggest a realistic monthly rent. Build an Excel model with: income, vacancy ([VACANCY ASSUMPTION]), property tax, insurance, management, maintenance, capex reserve, HOA or service charges, mortgage payment; then monthly and annual cash flow, cap rate, cash-on-cash return, DSCR and break-even rent. Add a stress test: rent -10%, rate +1 point, one major repair. Mark every assumption I didn't give you. Finish with a one-page summary: buy, negotiate (and to what price for my target of [TARGET RETURN]), or pass, with the 3 biggest risks.
What to change
- [LISTING LINK OR DETAILS]: A listing URL, or address, type, beds/baths, size and condition. Attach the agent's info pack if you have it.
- [PRICE]: Asking price or your planned offer.
- [DOWN PAYMENT]: Amount or %, e.g. "25%".
- [INTEREST RATE]: Your quoted rate, e.g. "6.5%". Ask your lender for a current figure.
- [LOAN TERM]: E.g. "30 years", "25 years". Say "interest-only" if that's your plan.
- [UPFRONT COSTS]: Closing costs, taxes on purchase, and planned repairs, e.g. "$9,000 closing + $12,000 rehab".
- [VACANCY ASSUMPTION]: E.g. "5%" (about 2.5 weeks a year empty). Use more for short lets or student housing.
- [TARGET RETURN]: E.g. "8% cash-on-cash" or "positive cash flow of $300/month".
Example result
- 14 Harbor St, Unit 2: investment summary
- Purchase 280,000 | 25% down (70,000) | 6.5%, 30 years | Upfront costs 18,000. All numbers are illustrative assumptions.
- Rent research
- 6 similar 2-bed units nearby list for 1,950 to 2,200 (links in the file). Suggested rent: 2,050.
- Monthly cash flow
- • Rent: 2,050
- • Vacancy 5%: -103
- • Property tax: -280
- • Insurance: -95
- • Management 8%: -164
- • Maintenance 5%: -103
- • Capex reserve 5%: -103
- • HOA: -150
- • Net operating income: 1,052
- • Mortgage (principal + interest on 210,000): -1,327
- • Cash flow: -275 per month
- Returns
- • Cap rate: 12,624 / 280,000 = 4.5%
- • Cash-on-cash: -3,300 / 88,000 = -3.8%
- • DSCR: 1,052 / 1,327 = 0.79 (most lenders want 1.2 or more for investment loans)
- • Break-even rent: about 2,400
- Stress tests
- • Rent -10% (1,845): cash flow about -430/month
- • Rate +1 point (7.5%): cash flow about -416/month
- • One 8,000 repair in year 1: year-1 cash flow about -11,300
- Verdict: negotiate or pass
- At 280,000 this property loses money every month. To reach your target of positive cash flow of about 100/month with the same loan terms, the price would need to be around 200,000, or you'd need a much larger down payment.
- Biggest risks
- • HOA fees can rise. Ask for the last 3 years of HOA budgets and any planned special assessments
- • Rent estimate relies on asking rents, not signed leases
- • Older building: check roof and boiler age before offering
- Assumptions you didn't give
- Property tax, insurance, management %, capex reserve. Replace them in the yellow cells and everything recalculates.
How to do it with todo.is
- Copy the prompt and fill in the property, price and financing.
- Attach the listing pack if you have one, then send it in todo.is.
- Your agent researches rents with links and builds the Excel model with formulas and a one-page verdict.
- Change any yellow assumption and the model updates. Ask "what if I offer 250,000?" or set a weekly to-do to analyse new listings.
Tips for a better result
- Budget maintenance and capex even on a renovated home. Roofs, boilers and appliances all wear out.
- Use signed rents where you can. Asking rents online are often higher than what tenants actually pay.
- Look at cash-on-cash return for your own money and cap rate to compare properties regardless of financing.
- Check local rules: licensing, rent control and short-let restrictions can change the numbers completely.
property investment analysis: FAQ
- What is a good cap rate for a rental property? It depends on the market and property type. Lower cap rates are common in expensive, stable areas and higher ones in cheaper or riskier areas, so compare with similar local properties.
- What is the difference between cap rate and cash-on-cash return? Cap rate is net operating income divided by the price, ignoring the loan. Cash-on-cash is your yearly cash flow after the mortgage divided by the cash you put in.
- What is the 1% rule? A quick screen that says monthly rent should be about 1% of the purchase price. It's a rough filter, not a substitute for a full cash flow analysis.
- Is this financial advice? No. It's a model built from your inputs and public data. Check your numbers with a lender, accountant or financial adviser before you buy.
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