Will this property cash flow?

Use market rent from comparable units currently leasing nearby, not the rent the seller quotes or the rent a listing advertises. Then subtract vacancy — commonly five to eight percent depending on the market and unit type.

Existing leases matter. A property rented below market is an opportunity only if you can verify the leases actually end when you are told they do.

Property taxes as reassessed after the sale, insurance for a rental rather than owner-occupied policy, water and sewer, trash, lawn and snow, any owner-paid utilities, association dues, and licensing where required.

Then the two that get skipped: maintenance, commonly five to ten percent of rent, and capital reserves for roof, heating and appliances, another five to ten percent. These are not optional. They are deferred, and deferral has an expiry date.

Professional management runs roughly eight to twelve percent of collected rent, plus a leasing fee per turnover. If you self-manage, include the cost anyway.

A property that only cash flows because you are working for free is not producing a return on capital. It is producing a wage, and one you cannot stop earning without breaking the model.

What remains after operating expenses is net operating income. Subtract principal and interest and you have cash flow.

A useful discipline: if cash flow is thin, test the deal at one percentage point higher on the rate and at a two-month vacancy. A property that survives both is genuinely resilient.