Real Estate Rental Investment Analyzer

This property shows negative year-one cash flow of $94.28 per month, indicating that the investment does not currently meet its cash-flow target despite potential long-term equity growth. Over a 10-year holding period, the investment is projected to generate a total return of $248,034, primarily driven by property appreciation and equity buildup.

Investment Analysis Report
Year-One Performance
Total Investment: $99,000 (Down Payment: $90,000 + Est. Closing/Rehab: $9,000)
Monthly Gross Income: $3,534.00 (Adjusted for 7% vacancy)
Monthly Mortgage (P&I): $2,347.12
Monthly Operating Expenses: $1,281.16 (Tax, Insurance, 8% Management, 5% Maintenance, 5% CapEx)
Net Monthly Cash Flow: -$94.28
Annual Cash Flow: -$1,131.36
Cap Rate: 5.34%
Cash-on-Cash Return: -1.14%

The property produces negative cash flow during the first year. While the projected long-term return may be attractive, the current operating performance indicates that the investment relies substantially on appreciation and equity buildup rather than immediate cash generation.

Quick Screening
1% Rule: 0.84% — Below the 1.0% threshold
50% Rule: Expenses represent approximately 33.7% of gross rent — Passes the 50% screening threshold
Gross Rent Multiplier (GRM): 9.87

The screening metrics present a mixed picture. The property does not meet the traditional 1% rule, while its operating expense ratio remains below the commonly used 50% screening threshold.

Multi-Year Projection

Assuming 3% annual property appreciation and the stated operating assumptions:

Year Property Value Loan Balance Equity Cumulative Cash Flow
1 $463,500 $355,592 $107,908 -$1,131
5 $521,673 $335,015 $186,658 -$4,920
10 $604,785 $300,562 $304,223 -$7,854

The projection indicates that equity increases substantially over the holding period, primarily through property appreciation and mortgage principal reduction. However, cumulative operating cash flow remains negative under the stated assumptions.

Exit Summary — 10-Year Hold
Final Property Value: $604,785
Estimated Selling Costs: 8%
Loan Balance at Exit: $300,562
Net Sale Proceeds: Approximately $255,888
Cumulative Cash Flow: -$7,854
Total Return: Approximately $248,034
Approx. Annualized Return: 15.65%

The projected return is primarily driven by appreciation and accumulated equity rather than positive operating cash flow. Investors should therefore evaluate whether the expected appreciation adequately compensates for the property's negative cash-flow profile and associated risks.

Key Investment Takeaways
Cash Flow: Negative during the first year at approximately -$94.28 per month.
1% Rule: Does not pass the traditional 1% screening threshold.
Operating Expense Ratio: Passes the stated 50% screening test.
Long-Term Equity: Projected to increase significantly over the 10-year holding period.
Primary Return Driver: Property appreciation and equity buildup rather than current cash flow.
Key Risk: The investment remains dependent on assumptions about appreciation, rent growth, vacancy, expenses, and future selling costs.
Next Steps
Verify local property tax assessments, particularly if taxes may be reassessed following a purchase.
Confirm whether the assumed $3,800 monthly rent reflects current market rent and determine whether additional rent growth is realistic.
Obtain a professional property inspection and refine maintenance and CapEx assumptions.
Test the investment under more conservative appreciation, rent-growth, vacancy, and expense scenarios.
Evaluate whether the negative cash flow is acceptable relative to the expected long-term equity growth.

This analysis is an educational estimate based on the information provided and standard real estate investment analysis methodology. It is not financial, investment, tax, or legal advice. Long-term projections depend on assumptions about rent growth, appreciation, vacancy, operating expenses, financing, and selling costs, which may not hold true. Consult a qualified financial advisor, accountant, tax professional, or real estate professional before making an investment decision.