Real estate investing can be complex, but some general principles can serve as useful starting points when analyzing investments. I can help make the number crunching easy when you're researching an investment property. This tool will help you distinguish a better deal than others by providing key operating ratios, including ROI (Return on Investment), IRR (Internal Rate of Return), CAP (Capitalization Ratio), CFROI (Cash Flow Return on Investment), DSCR (Debt Service Coverage Ratio), NOI (Net Operating Income), NIM (Net Income Multiplier), and more.

Let's start evaluating the potential financial performance of your investment property. Enter your property details, recurring operating expenses, and expected rental income to see your projected cash flow.

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IMPORTANT NOTE: Every market is different, and these guidelines may not apply to all situations. It is important to treat them as such and not as replacements for thorough financial analysis or advice from real estate professionals.

50% Rule—A rental property's operating expenses typically amount to around 50% of its income. Operating expenses do not include mortgage principal or interest. The remaining 50% can be used to pay the monthly mortgage payment. This rule helps quickly estimate the cash flow and profit of an investment.

1% Rule—The gross monthly rental income should be at least 1% of the property's purchase price, after repairs. Some investors use the 2% or even 3% Rule – the higher, the better.

A lesser-known guideline is the 70% Rule. This rule is used for purchasing and flipping distressed real estate for a profit. It states that the purchase price should be less than 70% of the after-repair value (ARV) minus repair costs.

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eGlobalHomes Team