Understanding Key Rental Property Metrics

This tool helps you estimate and compare potential cash flow from Single-Family Homes (SFH) and Multi-Family Homes (MFH). Here's an explanation of the metrics calculated:

• Purchase Price: The total cost to buy the property.
• Down Payment: The initial upfront cash paid towards the purchase price. The remainder is typically financed with a loan.
• Loan Amount: Purchase Price - Down Payment Amount.
• Initial Cash Investment: Down Payment Amount + Estimated Closing Costs. This is the total cash you need out-of-pocket to acquire the property.
• Monthly Mortgage (P&I): The fixed monthly payment towards the loan's Principal and Interest. It does not include property taxes or insurance (often called PITI if those are escrowed).
• Gross Scheduled Income (GSI): The total potential rental income if all units are rented for the entire year at full market rent.
  For SFH = Monthly Rent * 12
For MFH = (Avg. Rent Per Unit * Number of Units * 12)
• Vacancy Loss: An allowance for periods when units might be vacant. Calculated as GSI * Vacancy Allowance %.
• Other Income (MFH): Additional income from sources like laundry, parking, storage fees, common for multi-family properties.
• Effective Gross Income (EGI): The actual income you expect to collect.
  EGI = GSI - Vacancy Loss + Other Income
• Total Operating Expenses (OpEx): The sum of all annual expenses to run and maintain the property, *excluding* loan payments (debt service) and CapEx. Includes: Property Taxes, Insurance, Repairs & Maintenance, Property Management, Utilities paid by owner, HOA fees, Other OpEx.
• Net Operating Income (NOI): The property's profitability before considering financing costs and income taxes.
  NOI = EGI - Total Operating Expenses
• Annual Debt Service: Total mortgage payments (Principal + Interest) made over the year. Monthly Mortgage (P&I) * 12.
• Capital Expenditures (CapEx) Reserve: Money set aside annually for large, infrequent repairs or replacements (e.g., roof, HVAC, appliances). This is crucial for long-term financial health but is often not included in basic NOI calculations. This tool subtracts it after NOI to get to cash flow.
• Pre-Tax Cash Flow: The actual cash profit you expect to have before income taxes.
  Annual Pre-Tax Cash Flow = NOI - Annual Debt Service - Annual CapEx Reserve
Monthly Pre-Tax Cash Flow = Annual Pre-Tax Cash Flow / 12
• Cash-on-Cash Return (CoC ROI) (%): A key performance metric showing the annual pre-tax cash flow relative to the total initial cash invested.
  CoC ROI (%) = (Annual Pre-Tax Cash Flow / Total Initial Cash Investment) * 100

SFH vs. MFH Considerations:

• Management: SFHs are generally simpler to manage. MFHs involve multiple tenants, potentially more turnover, and more complex operational needs. Property management fees might be a higher consideration for MFHs if self-managing is not feasible.
• Vacancy Impact: A vacancy in an SFH means 100% loss of rental income for that unit. In an MFH, one vacant unit out of several has a proportionally smaller impact on total income.
• Financing: Financing for MFHs (especially 5+ units) can sometimes be commercial rather than residential, potentially having different terms and down payment requirements. (This tool uses a single set of loan inputs for simplicity).
• Expenses: MFHs might have some economies of scale (e.g., one roof for multiple units) but also shared/common area expenses (utilities, maintenance) that SFHs might not.
• Scalability: Acquiring multiple units in one MFH transaction can be more efficient for scaling a rental portfolio than buying multiple individual SFHs.

This tool provides calculations based on YOUR inputs and estimates. Real estate investing involves risks and requires thorough due diligence specific to your market (e.g., rental demand, property condition, local laws in Kolkata, India, or any other location). This is not financial advice.