STAGE 2 — ACQUISITION
Run the Numbers Before You Sign Anything.
Test the purchase price, rents, expenses, and financing on any property and see what it actually earns — before you commit.
The short answer
Before you commit to any property, model the numbers. Our proforma calculator lets you test purchase price, rents, expenses, and financing to see your cash flow, cash-on-cash return, and cap rate in real time. The proforma is the single document that forces honesty about whether a deal actually works, because it makes every assumption visible: what you'll realistically collect in rent, what the property will actually cost to run, and what your money earns once it's in the deal. Most investors underwrite a property on the number that looks good and discover the real math after closing. This walkthrough explains what each input means and how to read what the calculator tells you, so you can run the numbers on every property before you sign anything.
Proforma Calculator
Run the Numbers on Any Property
Enter the details below. Results appear once you've entered a purchase price and at least one unit's rent. Nothing is saved; this calculator runs entirely in your browser.
A Acquisition
B Income
Laundry, parking, storage, and any income beyond rent.
C Operating expenses
Annual is the default because taxes and insurance are known yearly.
A separate reserve from repairs; budget for big replacements.
D Financing
Amortizing loan only; no interest-only for now.
How to read the results
How to read the results
Every number in the results panel is one piece of the underwriting picture. Here is what each means, in plain talk, and the one worth watching for your situation.
Income & expenses
- Gross potential income (GPI)
- The total rent you'd collect in a full year at full occupancy, before any vacancy or deductions.
- Vacancy Vacancy is the portion of potential rental income lost when units sit empty, usually estimated as a percentage of gross income in a proforma. Modeling a realistic vacancy assumption — rather than zero — is essential to honest underwriting.
- The portion of gross income you expect to lose to empty units or unpaid rent, at your chosen Gross Income Gross income is a property's total potential income from all sources before any expenses or vacancy are subtracted. It's the starting point of a proforma. level.
- Effective gross income (EGI)
- Gross income minus vacancy. This is the realistic money the property produces and the base for expenses and returns.
- Operating Expenses Operating expenses are the recurring costs of running a property — taxes, insurance, property management, repairs and maintenance, utilities, and licenses — excluding debt service. They're subtracted from gross income to reach net operating income.
- The annual cost to run the property: taxes, insurance, management, repairs, and the rest. Vacancy is not an expense; it's already deducted above.
- Expense ratio
- Operating expenses as a share of effective gross income. A lower ratio usually means a leaner, more efficient property.
- Net Operating Income (NOI) Net operating income (NOI) is a property's gross income minus its operating expenses, calculated before debt service. It measures the property's earning power independent of how it's financed, and it's the figure cap rate is built on.
- Effective gross income minus operating expenses. It's the property's earning power before financing, and it feeds cap rate, DSCR, and cash flow.
Returns
- Cap Rate Cap rate is a property's net operating income divided by its cost (purchase price or all-in cost), expressed as a percentage. It measures the property's unleveraged return and is used to compare properties against each other and against the market.
- NOI divided by purchase price. The property's unleveraged return, useful for comparing properties against each other and the market.
- Yield on cost
- NOI divided by your All-In Cost All-in cost is an investment property's true basis — the purchase price plus closing costs, renovation, and any carrying costs during a non-rented period. Underwriting against all-in cost rather than purchase price alone gives an honest picture of what the investor actually has in the property. . Reflects the return on your total basis once acquisition costs are included.
- Debt Service Debt service is the total of principal and interest payments owed on a property's financing over a period. It's subtracted from net operating income to determine cash flow.
- Your total mortgage payments for the year. Financed deals must cover this with income.
- Debt-Service-Coverage Ratio (DSCR) The debt-service-coverage ratio (DSCR) measures a property's net operating income against its debt service — how well the income covers the loan payments. Lenders use DSCR to underwrite commercial and income-based loans; the specific thresholds are set by individual lender guidelines.
- NOI divided by annual debt service; how many times the income covers the loan. Below 1.20 is thin, below 1.00 the property doesn't cover its debt. Shown as n/a for all-cash deals.
- Cash Flow Cash flow is the money left after subtracting debt service from net operating income — the amount that actually reaches the investor's pocket. Positive cash flow means the property pays the owner to hold it; negative cash flow means the owner funds it each month.
- NOI minus debt service. Positive means the property pays you; negative, in red, means you fund it each month.
- Cash invested
- The cash you actually put in: Down Payment A down payment is the portion of a property's purchase price paid in cash up front, with the balance financed. It directly affects how much cash is tied up and therefore the cash-on-cash return. plus closing, renovation, and carrying costs.
- Cash-on-Cash Return Cash-on-cash return is annual pre-tax cash flow divided by the actual cash invested. It measures how hard invested dollars are working in the first year, and it reflects only cash flow — it does not include principal reduction, which is tracked separately as part of total return.
- Annual cash flow divided by cash invested. Cash flow only; it does not include Principal Reduction Principal reduction is the portion of each mortgage payment that pays down the loan balance, building equity whether or not the property appreciates. It's a real return, but it's tracked separately from cash-on-cash return, as part of total return and equity buildup. .
- Principal Reduction Principal reduction is the portion of each mortgage payment that pays down the loan balance, building equity whether or not the property appreciates. It's a real return, but it's tracked separately from cash-on-cash return, as part of total return and equity buildup.
- The principal paid down in the first 12 months. Real equity built whether the property appreciates or not.
- Total return on cash
- Cash flow plus year-1 principal reduction, divided by cash invested. Cash-on-cash plus the paydown; a fuller picture of your return.
- Gross rent multiplier (GRM)
- Purchase price divided by gross potential income. A coarse multiple for comparing price to rent across properties.
- Break-even occupancy
- The occupancy level needed for income to cover expenses plus debt. Below this the property loses money.
Value check
- Market cap rate
- The cap rate comparable properties sell at, or what the market pays for similar income. The Cap Rate Cap rate is a property's net operating income divided by its cost (purchase price or all-in cost), expressed as a percentage. It measures the property's unleveraged return and is used to compare properties against each other and against the market. you enter here sets the implied value.
- Implied value
- Net operating income divided by the market cap rate. At the market's cap rate, this is roughly what an investor would pay for the property's income.
- Equity created vs. all-in cost
- Implied value minus your all-in cost. Positive means you'd buy it below what the market values the income at. Negative, shown in red, means you'd pay more than the market does; that's the honest signal to reconsider the price.
This calculator produces estimates from the numbers you enter. It is not a valuation, an appraisal, lending guidance, or tax advice. Verify financing terms with your lender, tax treatment with your CPA, and property specifics with your own due diligence. The Property Exchange Group at Real Broker, LLC does not provide tax, legal, or lending advice.
Want a second set of eyes on your numbers?
The calculator gives you the math. An investor-minded team helps you pressure-test the assumptions behind it. Run a scenario and bring us the numbers.