This is a teaching example, not an available listing or a recommendation. A $250,000 property with $2,500 monthly scheduled rent looks attractive at first glance. Here is what changes when expenses and financing enter the model.
| Annual item | Assumption / amount |
|---|---|
| Scheduled rent | $30,000 |
| Vacancy allowance | 10% · −$3,000 |
| Property tax + insurance | −$4,000 |
| Maintenance + management | 5% of collected rent + 8% of scheduled rent · −$3,750 |
| Conventional NOI | $19,250 |
| Capital reserve | 5% of collected rent · −$1,350 |
| Mortgage principal and interest | About −$19,311/year |
| Cash flow after reserve and debt | About −$118/month |
Financing assumes 20% down, a 9% fixed interest rate and 30-year amortization. Closing costs and initial repairs are additional cash requirements. Utilities are excluded in this illustration; any owner-paid services would reduce cash flow further.
The useful question
Which assumptions are supported by a lease, bill or quote—and which are still guesses? The cap rate here is 7.70%, while financed cash flow is negative. Those are different measures of the same property.
Try the downside before the upside
Replace the example with a real property’s inputs, then compare a lower-rent or higher-expense case. Save both analyses and list the unresolved costs before making a decision.
Open the worked example and analyzer →
Future updates follow this format: one decision, visible assumptions and a practical next step. No guaranteed returns or invented success stories.