DEV Community: Lina Reeves

DSCR Formula Explained: Why Your Lender Gets a Different Number

Lina Reeves — Fri, 18 Sep 2026 04:44:51 +0000

DSCR (Debt Service Coverage Ratio) is the metric that decides whether your DSCR loan gets approved. Most investors calculate it wrong — and find out when the lender denies them.

The Formula

DSCR = Gross Monthly Rent / Monthly PITIA

Where PITIA = Principal + Interest + Taxes + Insurance + Association (HOA)

The Catch: Your Numbers vs. Lender Numbers

Investors use:

Actual lease rent (what the tenant pays)
Actual insurance premium (their policy)
Property tax from county records

Lenders use:

Appraised market rent (lower of lease or appraisal)
Insurance at replacement cost (often higher)
Annualized taxes (may differ from current bill)

# Investor's calculation
investor_rent = 1350
investor_pitia = 1030
investor_dscr = investor_rent / investor_pitia
print(f"Investor DSCR: {investor_dscr:.2f}")
# Investor DSCR: 1.31

# Lender's calculation
lender_rent = 1250  # appraised, not actual
lender_pitia = 1060  # higher insurance estimate
lender_dscr = lender_rent / lender_pitia
print(f"Lender DSCR: {lender_dscr:.2f}")
# Lender DSCR: 1.18

print(f"Gap: {investor_dscr - lender_dscr:.2f}")
# Gap: 0.13

A 0.13 gap. That is the difference between approved and denied at most lenders (minimum 1.25).

How to Fix a Low DSCR

There are only 3 variables: rent (up), PITIA (down), or down payment (up).

def calc_dscr(rent, loan_amount, rate, years, monthly_tax, monthly_ins, hoa=0):
    r = rate / 100 / 12
    n = years * 12
    pi = loan_amount * (r * (1+r)**n) / ((1+r)**n - 1)
    pitia = pi + monthly_tax + monthly_ins + hoa
    return rent / pitia, pitia

# Original: 25% down
price = 165000
loan = price * 0.75
dscr, pitia = calc_dscr(1300, loan, 7.5, 30, 225, 165)
print(f"25% down: DSCR = {dscr:.2f} (PITIA ${pitia:,.0f})")

# Fix: 30% down
loan_30 = price * 0.70
dscr_30, pitia_30 = calc_dscr(1300, loan_30, 7.5, 30, 225, 165)
print(f"30% down: DSCR = {dscr_30:.2f} (PITIA ${pitia_30:,.0f})")

print(f"Extra 5% down = extra ${price * 0.05:,.0f} cash")
print(f"DSCR improvement: +{dscr_30 - dscr:.2f}")

DSCR Tiers by Lender

DSCR	Lender Response	Typical Rate Impact
1.50+	Best terms, lowest rate	Base rate
1.25-1.49	Standard approval	+0.0-0.25%
1.10-1.24	Possible with compensating factors	+0.25-0.75%
1.00-1.09	Few lenders, higher rate	+0.75-1.5%
Below 1.0	Most lenders decline	N/A

Bottom Line

Always calculate DSCR using the lender's assumptions, not yours:

Use appraised rent (10-15% below actual lease is common)
Use replacement-cost insurance (15-20% above your actual policy)
Budget for a 0.10-0.15 gap between your DSCR and the lender's

Calculate your DSCR before applying:
https://arvcalc.com/dscr-calculator

The Real Cost of Self-Managing a Rental

Lina Reeves — Thu, 17 Sep 2026 08:00:02 +0000

Insurance just killed a deal I was looking at. The property was in coastal North Carolina — great location, strong rents, good price.

But insurance: $4,800/year. That is $400/month before I even pay the mortgage.

North Carolina approved 7.5% rate increases two years in a row. The statewide average went from $1,800 to $3,000. Coastal is double that.

This matters for why PM fees should alwa because insurance is an operating expense that directly reduces your NOI and cash flow. A property that cash-flowed positive at $1,500/year insurance goes negative at $3,000.

My rule now: get an actual insurance quote before running any numbers. The generic estimate in your calculator is a starting point, not the final answer.

Free calculators I use for all of this:

Rental Property Calculator — 10-year total return projection
NOI Calculator — net operating income breakdown
Rehab Cost Estimator — renovation budget by room
Mortgage Calculator — investment property payments
1031 Exchange Calculator — tax deferral through exchange

Everything at arvcalc.com. No signup, no paywall.

The 5 Hidden Expenses That Kill Rental Property Cash Flow

Lina Reeves — Wed, 16 Sep 2026 03:21:56 +0000

Most rental property "analyses" include 4 line items: rent, mortgage, taxes, insurance. This misses 5 expenses that total $400-$600/month on a typical property — turning a $500/mo cash flow into $0.

The Basic (Wrong) Analysis

Rent:       $1,500/mo
Mortgage:   -$850
Taxes:      -$225
Insurance:  -$175
──────────
"Cash flow": $250/mo

Looks profitable. Here are the 5 expenses this analysis ignores.

1. Vacancy (5-10% of rent)

No property is rented 365 days a year. Tenants leave. Turnovers take 2-6 weeks. Between cleaning, repairs, listing, showing, and screening — you lose rent.

National average: 6.6%
Midwest (OH, IN, TN): 5-7%
South (FL, TX, GA): 6-9%

$1,500/mo x 7% = $105/mo lost

2. Repairs & Maintenance (8-12% of rent)

Things break. Plumbing leaks. Appliances die. Roofs need patching. Budget 10% of rent for ongoing repairs.

$1,500/mo x 10% = $150/mo

As a property ages, this percentage increases. Properties over 30 years old may need 12-15%.

3. Property Management (8-10% of rent)

Even if you self-manage today, price it in. Your time has value. When you buy property #3 or #4, you will hire a PM. If the deal only works because you are the free labor — it does not work.

$1,500/mo x 9% = $135/mo

4. Capital Expenditure Reserve (5-8% of rent)

CapEx is different from repairs. Repairs fix what is broken. CapEx replaces what wears out: roof ($8K-$15K every 25 years), HVAC ($5K-$8K every 15 years), water heater ($1K every 10 years), flooring ($3K-$5K every 10 years).

$1,500/mo x 5% = $75/mo (minimum)

5. Landlord-Paid Utilities ($50-$200/mo)

Water, sewer, trash — commonly landlord-paid on multifamily. Even on SFR, you pay all utilities during vacancy.

Average: $80/mo

The Real Analysis

Rent:             $1,500/mo
Mortgage:         -$850
Taxes:            -$225
Insurance:        -$175
Vacancy (7%):     -$105
Repairs (10%):    -$150
PM (9%):          -$135
CapEx (5%):       -$75
Utilities:        -$80
──────────────
Real cash flow:   -$295/mo

From +$250 to -$295. A $545/month swing.

The Breakeven Point

For this property to actually cash flow at $0, rent needs to be:

expenses_fixed = 850 + 225 + 175 + 80  # $1,330
expense_pct = 0.07 + 0.10 + 0.09 + 0.05  # 31%

# rent - fixed - rent*pct = 0
# rent * (1 - 0.31) = 1330
# rent = 1330 / 0.69

breakeven_rent = 1330 / 0.69
print(f"Breakeven rent: ${breakeven_rent:,.0f}/mo")
# Breakeven rent: $1,928/mo

The property needs $1,928/mo rent to break even — not $1,500. That is a 28% gap.

Bottom Line

If your rental analysis has fewer than 8 line items, it is wrong. Add vacancy, repairs, PM, CapEx, and utilities. If the deal survives all 5 — it is real. If it does not — walk away.

5 Numbers Every Landlord Should Run Before Buying

Lina Reeves — Mon, 14 Sep 2026 08:00:02 +0000

Three numbers changed how I think about essential dea:

0.7% monthly rent-to-price ratio separates cash flow from appreciation markets. Below 0.7% you are betting on price growth.

1.25 DSCR threshold most lenders require. If your property does not earn 25% more than the mortgage, DSCR lenders decline. At 7% rates most Charlotte Austin Raleigh properties fall below 1.0.

27.5 years IRS depreciation schedule. A $200,000 building gives you $7,273/year in paper losses. At 24% tax bracket that is $1,745 in real tax savings.

These numbers are not opinions. They are math.

Free calculators I use for all of this:

Fix and Flip Calculator — flip profit with holding costs
70% Rule Calculator — max offer for flip deals
Cash-on-Cash Calculator — return on actual cash invested
Cap Rate Calculator — property yield before financing
Hard Money Calculator — hard money loan costs

Everything at arvcalc.com. No signup, no paywall.

How to Calculate Vacancy Rate for Rental Properties (Formula + Real Data)

Lina Reeves — Mon, 14 Sep 2026 03:12:41 +0000

Vacancy rate is one of the most misunderstood metrics in rental property analysis. Most investors plug in a flat 5% and move on. Here is why that is wrong — and how to calculate it correctly.

The Formula

Vacancy Rate = (Vacant Units × Time Vacant) / (Total Units × Total Time) × 100

For a single-family rental:

Vacancy Rate = Weeks Vacant / 52 × 100

If your property sits empty for 4 weeks between tenants:

4 / 52 × 100 = 7.7% vacancy rate

Not 5%. Not "about 5%." It is 7.7% — and that changes your cash flow projection.

Why Flat 5% Is Wrong

The "use 5%" advice assumes:

2.6 weeks of vacancy per year
Tenant stays 2+ years
You re-rent within 2 weeks of move-out
No seasonal slowdown

In reality, vacancy varies dramatically by market:

Market	Vacancy Rate	Annual Loss ($1,400/mo rent)
Cleveland (44118)	4.2%	$705
Indianapolis	5.8%	$974
Memphis	7.1%	$1,193
Atlanta	6.3%	$1,058
Houston	8.9%	$1,495

The Real Cost Formula

Vacancy is not just lost rent. Every turnover has hard costs:

def true_vacancy_cost(monthly_rent, vacancy_rate, turnovers_per_year):
    lost_rent = monthly_rent * 12 * (vacancy_rate / 100)
    turnover_cost = turnovers_per_year * 1000  # cleaning, repairs, listing
    return lost_rent + turnover_cost

# Example: $1,400/mo, 7% vacancy, 0.5 turnovers/year
cost = true_vacancy_cost(1400, 7, 0.5)
print(f"True vacancy cost: ${cost:,.0f}/year")
# True vacancy cost: $1,676/year

That is $140/month — not the $58/month you get from a flat 5%.

Where to Get Real Vacancy Data

Census ACS — ZIP-level vacancy rates updated annually
Local property manager — ask for their portfolio vacancy rate
Zillow/Apartments.com — count listings vs total units in a ZIP
Your own records — track actual days vacant per property per year

Stress Testing

Never underwrite at the base rate. Stress test at 1.5x to see if the deal survives:

Base vacancy: 6%     -> Cash flow: $187/month
Stress test (9%):    -> Cash flow: $117/month
Stress test (12%):   -> Cash flow: $47/month

If the deal breaks at 1.5x, the margin is too thin.

Bottom Line

Stop using a flat 5% vacancy. Get the real number for your ZIP code, add a turnover buffer, and stress test at 1.5x. The 3-5 minutes this takes can save you thousands in unexpected vacancy losses.

The Per-Unit Economics That Make Multifamily Beat SFR Every Time

Lina Reeves — Fri, 11 Sep 2026 04:37:59 +0000

The core advantage of small multifamily (2-4 units) over single-family is that fixed costs do not scale linearly with units.

FIXED COSTS (per property, not per unit):
  Property tax bill:     1 regardless of units
  Insurance policy:      1 regardless of units
  Roof replacement:      1 regardless of units
  Management contract:   1 regardless of units
  Lawn care:             1 regardless of units

Cost comparison: fourplex vs 4 SFR

                        Fourplex      4 x SFR       Difference
Purchase Price          $240,000      $240,000       same
Monthly Rent (4 x $850) $3,400        $3,400         same
Property Tax            $200/mo       $340/mo        -$140
Insurance               $200/mo       $500/mo        -$300
Management (9%)         $306/mo       $308/mo        -$2
Maintenance             $160/mo       $240/mo        -$80
CapEx                   $100/mo       $200/mo        -$100
Mortgage (7%, 25% down) $1,198/mo     $1,196/mo      -$2
Total Expenses          $2,164/mo     $2,784/mo      -$620
Cash Flow               +$896/mo      +$456/mo       +$440

The fourplex produces $440/month more cash flow on identical investment and rent.

Why each expense category differs

Property Tax:
  Fourplex: 1 parcel assessed at $240K
  4 SFR: 4 parcels x base assessment fees = 15-40% higher total

Insurance:
  Fourplex: 1 policy, $2,400/yr
  4 SFR: 4 policies, $1,500/yr each = $6,000/yr (2.5x more)

Maintenance:
  Fourplex: 1 roof, 1 foundation, 1 lot
  4 SFR: 4 roofs, 4 foundations, 4 lots
  Roof: $12K (fourplex) vs 4 x $8K = $32K (SFR)

The DSCR advantage

Fourplex DSCR:
  Rent: $3,400 / PITIA: $1,598 = 2.13

One vacancy (25% of units) still produces DSCR 1.60
One SFR vacancy (100% of units) produces DSCR 0.00

The vacancy risk profile is the hidden advantage. A fourplex with one vacancy loses 25% of income. A SFR with one vacancy loses 100%.

When SFR beats multifamily

SFR wins when:
  1. Appreciation market (SFR appreciates faster)
  2. Exit to owner-occupant (larger buyer pool)
  3. No multifamily inventory available
  4. Tenant quality priority
  5. Management simplicity (1 tenant vs 4)

For cash flow at current 7% rates, multifamily wins. For total return in high-appreciation markets, SFR may win over 10+ years.

For multifamily analysis with per-unit expense breakdown, there is a free multifamily calculator at ArvCalc.

BRRRR in 2026: the Math Nobody Shows You

Lina Reeves — Thu, 10 Sep 2026 08:00:02 +0000

Three numbers changed how I think about realistic BRRRR number:

0.7% monthly rent-to-price ratio separates cash flow from appreciation markets. Below 0.7% you are betting on price growth.

1.25 DSCR threshold most lenders require. If your property does not earn 25% more than the mortgage, DSCR lenders decline. At 7% rates most Charlotte Austin Raleigh properties fall below 1.0.

27.5 years IRS depreciation schedule. A $200,000 building gives you $7,273/year in paper losses. At 24% tax bracket that is $1,745 in real tax savings.

These numbers are not opinions. They are math.

Free calculators I use for all of this:

Rehab Cost Estimator — renovation budget by room
DSCR Calculator — check if rent covers the mortgage
BRRRR Calculator — buy-rehab-rent-refinance-repeat analysis
Hard Money Calculator — hard money loan costs
NOI Calculator — net operating income breakdown

Everything at arvcalc.com. No signup, no paywall.

The 70% Rule: Why Experienced Flippers Use 65% Instead

Lina Reeves — Wed, 09 Sep 2026 04:31:22 +0000

The standard 70% rule for house flipping:

Max Offer = ARV x 70% - Rehab Cost

Where:

ARV   = After Repair Value (post-renovation market value)
Rehab = Total renovation cost including materials and labor
Max   = Maximum purchase price to maintain acceptable profit margin

The math behind 70%

ARV breakdown:
  Purchase price:        <= 70% of ARV
  Remaining 30% covers:
    Closing costs (buy):   3% of purchase
    Closing costs (sell):  6% of ARV
    Holding costs:         $1,200-$2,500/mo x months
    Hard money interest:   $1,000-$1,500/mo x months
    Taxes:                 30-50% of profit (dealers)
    Profit:                remainder

Example at 70%

ARV:                    $200,000
Rehab:                  $35,000
Max Offer (70% rule):   $200,000 x 0.70 - $35,000 = $105,000

Profit analysis if purchased at $105,000:
  Sale price:            $200,000
  - Purchase:            $105,000
  - Rehab:               $35,000
  - Buy closing (3%):    $3,150
  - Sell closing (6%):   $12,000
  - Holding (4 mo):      $6,000
  - HM interest (4 mo):  $4,200
  Pre-tax profit:        $34,650
  - Taxes (~38%):        $13,167
  Net profit:            $21,483

Why experienced flippers use 65%

At 65%:
  Max Offer = $200,000 x 0.65 - $35,000 = $95,000

  Pre-tax profit:        $44,650 (+$10,000 vs 70%)
  Net profit:            $27,683 (+$6,200 vs 70%)

The 5% difference ($10,000 lower purchase) creates $6,200 more after-tax profit. More importantly, it creates cushion for the three things that always go wrong:

Common overruns:
  Rehab budget +20%:     $7,000 extra cost
  Timeline +2 months:    $3,400 extra holding
  ARV comes in 5% low:   $10,000 less revenue

Total potential downside: $20,400

At 70% rule: $21,483 profit - $20,400 overrun = $1,083 (barely break even)
At 65% rule: $27,683 profit - $20,400 overrun = $7,283 (still profitable)

The 65% rule does not make you more money in a perfect scenario. It prevents you from losing money when things go wrong.

When to break the 70% rule

Only break it when:
  1. You are the contractor (save 30-40% on labor)
  2. The property is in a market with >5% annual appreciation
  3. You plan to hold as a rental if the flip fails
  4. The rehab is purely cosmetic (paint + carpet, <$10K)

Never break it when:
  1. You are using hard money (holding costs compound)
  2. The rehab is structural (foundation, roof, plumbing)
  3. You are new to flipping (first 3 deals, use 65%)
  4. The market is softening (days on market increasing)

Cap Rate vs Cash-on-Cash: Which One Actually Matters

Lina Reeves — Mon, 07 Sep 2026 08:00:01 +0000

The difference between a 5% cap rate and a 7% cap rate on a $200K property is $4,000 per year in NOI. That is $333/month. Real money.

But here is what nobody tells you about comparing: cap rate alone does not tell you if the deal works. A 7% cap rate with 9% vacancy and rising insurance can produce negative cash flow. A 5% cap rate in a tight market with 4% vacancy might actually cash flow better after financing.

The numbers I check on every deal:

Cap rate — is the property earning enough relative to price?
Cash flow — can I cover the mortgage and still eat?
DSCR — will a lender actually fund this?
Total ROI — what do I make over 5-10 years including equity?

Four numbers. Two minutes each. That is the entire analysis.

Free calculators I use for all of this:

NOI Calculator — net operating income breakdown
Hard Money Calculator — hard money loan costs
Cash-on-Cash Calculator — return on actual cash invested
Depreciation Calculator — annual tax deduction
ARV Calculator — after repair value from comps

Everything at arvcalc.com. No signup, no paywall.

The Fix and Flip Profit Formula Most Investors Get Wrong

Lina Reeves — Mon, 07 Sep 2026 06:03:28 +0000

The simplified flip profit formula:

Profit = Sale Price - Purchase Price - Rehab Cost

This formula is wrong. It misses 8 cost categories that consume 40-60% of the gross margin.

The complete formula

Net Profit = Sale Price
           - Purchase Price
           - Rehab Cost
           - Buy Closing Costs
           - Sell Closing Costs
           - Hard Money Interest
           - Hard Money Points
           - Insurance (hold period)
           - Property Tax (hold period)
           - Utilities (hold period)
           - Federal Income Tax
           - Self-Employment Tax
           - State Income Tax

Worked example

Purchase:           $120,000
Rehab:              $35,000
Sale (ARV):         $205,000

ACQUISITION COSTS
Buy closing (3%):   $3,600
Hard money points:  $2,400  (2 pts on $120K loan)

HOLDING COSTS (4 months)
HM interest (12%):  $4,800  ($1,200/mo x 4)
Insurance:          $600    ($150/mo x 4)
Property tax:       $1,200  ($300/mo x 4)
Utilities:          $800    ($200/mo x 4)

DISPOSITION COSTS
Agent commission:   $10,250 (5% of $205K)

TOTAL COSTS:        $23,650

PRE-TAX PROFIT
Gross:              $205,000 - $120,000 - $35,000 = $50,000
After costs:        $50,000 - $23,650 = $26,350

TAXES (flipper = dealer status)
Federal (22%):      $5,797   (22% of $26,350)
Self-employment:    $4,032   (15.3% of $26,350)
State (3%):         $791     (3% of $26,350)
Total tax:          $10,620

NET PROFIT:         $26,350 - $10,620 = $15,730

The 70% rule as a sanity check

Max Offer = ARV x 70% - Rehab

Max Offer = $205,000 x 0.70 - $35,000
Max Offer = $143,500 - $35,000
Max Offer = $108,500

At $120,000 purchase, this deal exceeds the 70% rule by $11,500. That explains the thin margin.

If purchased at $108,500 (70% rule price):
Pre-tax profit:     $205,000 - $108,500 - $35,000 - $23,650 = $37,850
After tax (~38%):   $37,850 x 0.62 = $23,467

Net improvement:    $23,467 - $15,730 = $7,737

The 70% rule exists specifically to create enough margin to absorb holding costs, closing costs, and taxes while leaving acceptable profit.

Cost sensitivity: what happens when rehab runs over

Rehab Budget    Actual Cost    Overrun    Extra Holding    Total Impact
$35,000         $35,000        $0         $0               baseline
$35,000         $40,000        $5,000     $1,200 (1 mo)    -$6,200
$35,000         $45,000        $10,000    $2,400 (2 mo)    -$12,400
$35,000         $50,000        $15,000    $3,600 (3 mo)    -$18,600

A $15,000 rehab overrun does not cost $15,000. It costs $18,600 because each extra month of work adds $1,200 in hard money interest plus insurance, tax, and utilities. The rehab overrun multiplier is approximately 1.24x in this scenario.

What this calculation does not cover

It does not account for:
  Permit fees and inspection delays
  Utility connection/transfer fees
  Dumpster and debris removal
  Contractor no-shows and rework
  Market price changes during hold
  Buyer concessions at sale
  Home warranty for buyer
  1031 exchange (not available for dealers)

The line-by-line profit calculation is a planning estimate. Actual results depend on execution speed, contractor reliability, and market timing.

Why Half Your Gross Rent Disappears Before the Mortgage Payment

Lina Reeves — Fri, 04 Sep 2026 04:35:32 +0000

The standard NOI formula:

NOI = Gross Rental Income − Operating Expenses

That looks simple. The problem is what counts as an operating expense and what does not. Getting this wrong overstates NOI by 30-50%.

The expense categories that belong in NOI

Category               Typical Range      Source
─
Property tax           0.5-2.5% of value  County assessor
Insurance (DP-3)       $1,500-$4,500/yr   State DOI data
Vacancy allowance      5-8% of GPR        Census ACS / FRED
Maintenance            8-10% of EGI       Industry standard
Property management    8-10% of EGI       Local PM quotes
CapEx reserves         3-5% of EGI        Component age analysis
Landlord utilities     $0-$200/mo         Lease terms
HOA                    $0-$500/mo         Association docs

The items that do NOT belong in NOI

Mortgage (P&I)           → financing cost, not operating
Depreciation             → non-cash, tax accounting only
Income tax               → varies by investor, not property
Capital improvements     → one-time, not recurring
Loan origination fees    → financing cost
Closing costs            → acquisition cost

The mortgage exclusion is the most common mistake. Two investors buy the same property — one puts 20% down, the other pays cash. The NOI is identical. The cash flow is different. NOI measures the property. Cash flow measures the deal.

Full calculation: 3-unit property, $320K

STEP 1 — GROSS POTENTIAL RENT
Monthly rent: $1,100/unit × 3 units = $3,300/mo
Annual GPR: $3,300 × 12 = $39,600

STEP 2 — VACANCY
Rate: 7% (Census ACS data for this metro)
Vacancy loss: $39,600 × 0.07 = $2,772
Effective Gross Income: $39,600 − $2,772 = $36,828

STEP 3 — OPERATING EXPENSES
Property tax:        $3,200   (county assessor, 1.0% of value)
Insurance:           $2,100   (landlord DP-3 policy)
Property management: $3,315   (9% of EGI)
Maintenance:         $2,946   (8% of EGI)
CapEx reserves:      $1,841   (5% of EGI)
Utilities:           $0       (tenant pays all)
HOA:                 $0
────────────────────────────
Total expenses:      $13,402

STEP 4 — NOI
NOI = $36,828 − $13,402 = $23,426

What NOI tells you downstream

NOI feeds directly into the two metrics lenders and investors use most:

CAP RATE
Cap Rate = NOI / Property Value × 100
Cap Rate = $23,426 / $320,000 × 100 = 7.32%

A 7.32% cap rate means the property earns 7.32 cents
of net income for every dollar of value. Above 6% is
generally considered strong for residential.

DSCR (Debt Service Coverage Ratio)
DSCR = NOI / Annual Debt Service

Loan: $256,000 at 7.0%, 30yr → $1,703/mo → $20,436/yr
DSCR = $23,426 / $20,436 = 1.15

A DSCR of 1.15 means NOI covers the mortgage with
15% cushion. Most lenders require 1.25+. This deal
is borderline — needs either higher rent, lower price,
or larger down payment to qualify.

The expense ratio reality check

Expense Ratio = Total Expenses / Effective Gross Income
Expense Ratio = $13,402 / $36,828 = 36.4%

Typical ranges:
  25-35%   Well-managed SFR, low-tax state
  35-45%   Average multifamily, moderate expenses
  45-55%   Older property, high-tax state, deferred maintenance
  55%+     Troubled asset or institutional management overhead

If someone tells you their NOI is 80% of gross rent, they forgot half the expenses.

What this calculation does not cover

It does not account for:
  Rent growth (year 2+ projections)
  Expense inflation (insurance +9% YoY in 2026)
  Capital improvement needs (roof, HVAC, plumbing)
  Lease-up period for vacant units
  Concessions (free month, reduced deposit)
  Seasonal vacancy patterns
  Property-specific risks (environmental, structural)

NOI is a point-in-time income snapshot. For multi-year projections, use a pro forma with growth assumptions. For a quick NOI calculation with all standard expense categories, there is a free NOI calculator at ArvCalc.

Why Most Rental Deals Lose Money at 7.5% Rates

Lina Reeves — Thu, 03 Sep 2026 08:00:01 +0000

Property tax is the expense most investors get wrong when analyzing rental cash flow.

The national average is about 1.1%. But county-by-county variation is massive:

Cuyahoga County (Cleveland): 1.89%
Mecklenburg County (Charlotte): 0.83%
Buncombe County (Asheville): 0.65%

On a $250K property, the difference between 0.65% and 1.89% is $3,100/year. That is $258/month — often the entire cash flow margin.

I learned this the hard way on my second deal. Budgeted 1% for taxes on a Cleveland property. Actual rate: 1.89%. Wiped out my projected $150/month cash flow and then some.

Now I check the county assessor website before I even look at photos. Tax rate first, photos second.

Free calculators I use for all of this:

Hard Money Calculator — hard money loan costs
BRRRR Calculator — buy-rehab-rent-refinance-repeat analysis
Rehab Cost Estimator — renovation budget by room
Cash-on-Cash Calculator — return on actual cash invested
Fix and Flip Calculator — flip profit with holding costs

Everything at arvcalc.com. No signup, no paywall.