Does this deal cash flow?

A cap rate is the property's yearly income as a percentage of its price, before any loan. You take the net operating income (rent left after operating costs) and divide it by the purchase price. It lets you compare two properties on equal footing, since it ignores how each one is financed. There is no single right number. In pricey coastal areas like ours, cap rates tend to run lower than in cheaper inland markets.

Cash flow is what is left each month after the mortgage and every operating cost are paid. Positive means the property pays for itself. A thinner cash flow can still make sense if you are buying for appreciation, loan paydown, or a value-add plan, but you want to go in with eyes open, not by accident.

Cap rate ignores your loan. Cash-on-cash return measures the cash you actually pocket in a year against the cash you actually put in, down payment and closing costs included. Two buyers can purchase the same building and earn very different cash-on-cash returns depending on their financing.

Debt Service Coverage Ratio is the property's net operating income divided by its yearly loan payments. Above 1.0 means the income covers the loan. Many investor loans want roughly 1.20 to 1.25 or higher, so it is worth knowing your number before you apply.

It is a fast screen: monthly rent divided by price, aiming for 1 percent or more. It is only a first filter, not a final answer, and it is genuinely hard to hit in Orange County and Long Beach because prices are high relative to rents. Use it to rank options, then run the full numbers.

The three big ones are vacancy, ongoing repairs, and capital expenditures, which is your savings for big replacements like a roof or an HVAC system. Many people also forget property management even if they plan to self-manage today. Leaving these out makes a deal look better than it is.

Investment property loans usually ask for more down than a primary residence, often around 20 to 25 percent or more, and the rate is typically higher too. Your exact terms depend on the lender, the property, and your profile, so confirm with a licensed lender.

Sometimes. Some investors accept a small monthly shortfall for strong appreciation potential, a below-market purchase they can improve, or a path to higher rents. The risk is that you feed the property every month, so it should be a deliberate choice with a plan, not a surprise.

It is a fast estimate based on the numbers you enter, not an appraisal, a rent survey, or a loan approval. Real rents and expenses vary by property. Use it to screen deals quickly, then have David and a lender pressure-test the ones worth pursuing.

Yes. Send him the property and he will pull true market rents, real expenses, and current investor financing, then send back a full breakdown. Use the form below.