NOI is before financing
Net operating income subtracts vacancy, management, taxes, insurance, HOA, maintenance, and other operating costs, but not principal or interest.
Income property underwriting
Connect rent, operations, debt, equity, and sale proceeds
Underwrite the first year, project the full holding period, and separate property performance from financing with NOI, cap rate, cash-on-cash return, DSCR, equity, profit, and IRR.
Plan with context
Rental returns come from operations, financing, and the exit—and each can fail independently.
A durable analysis starts with collected rent after vacancy, subtracts complete operating costs, separates mortgage payments from NOI, and treats sale proceeds as an uncertain final cash flow.
Cap rate isolates property operations
Dividing first-year NOI by purchase price allows a quick unlevered comparison, although it does not capture financing, future growth, or sale proceeds.
Cash-on-cash measures current yield
First-year cash flow after debt service is divided by the initial down payment, closing costs, and repairs to show the return on cash actually invested.
DSCR tests debt burden
Debt-service coverage compares NOI with scheduled mortgage payments. A ratio near or below one means property operations provide little or no cushion.
IRR includes timing
The modeled internal rate of return uses initial cash, every annual cash flow, and final net sale proceeds. Small assumption changes can move it materially.
Reserves protect the forecast
Vacancy, tenant turnover, deductibles, systems replacement, legal costs, and capital projects can arrive unevenly even when the annual average looks affordable.
Included
Purchase, down payment, repairs and after-repair value, loan, rent and other income, vacancy, management, five operating-cost groups, growth, appreciation, sale costs, NOI, returns, sensitivity, chart, and ledger.
Not included
Income tax, depreciation, capital-gains tax, recapture, financing fees, depreciation schedules, major replacement timing, tenant deposits, refinancing, or market volatility.
Use it well
Verify market rent, property tax and insurance, inspect deferred maintenance, use a conservative vacancy rate, and stress-test lower rent and higher repairs before making an offer.