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The investing guide
The best investments
survive the boring math.
No appreciation assumed. No rent we invented. Just your numbers, the rules that apply, and Lydie’s second look before you commit.
The A-frame guest residence at The Estate, Camano Island. A second dwelling changes how a property can be used, and what must be verified.
Gross income is not the operating result
Rent is what a tenant pays. What the property earns is what is left after it runs.
Net operating income describes the property, whoever owns it and however they paid. That is why it leaves out the loan. Cash flow describes you: your loan, your reserves, your result. Mixing the two is the most common reason two people disagree about the same property.
The expenses that decide it
- Vacancy and credit lossTime between tenants, the weeks spent on turnover, and rent that is late or never paid. Even a well-run property loses some income each year. Model it, even if the unit is leased today.
- Repairs and maintenanceThe ordinary work: a faucet, a dishwasher, a fence board. Older homes and properties with more outdoor space cost more. Many investors model a percentage of rent; we would rather look at the property’s age and systems.
- Property managementEven if you plan to self-manage, model it. Your time has a cost, and it tells you whether the property works if your plans change.
- InsuranceA landlord policy is different from a homeowner policy. Get a quote for the specific address; age, roof and claims history move it.
- Property taxUse the county assessor record, and remember the assessed value can change after a sale.
- HOA duesRead what they cover. Then read the budget and reserve study: an underfunded association means special assessments, which are your cost, not the tenant’s.
- Owner-paid utilitiesWater, sewer and garbage are often billed to the owner, especially in multi-unit buildings. Check how the property is metered.
Reserves are real, and they are not operating expenses
Some costs arrive in years, not months: a roof, a water heater, a furnace or heat pump, flooring, appliances, exterior paint. They do not belong in NOI, because NOI measures a normal year of operation. But they belong in your plan, because they will arrive.
The analyzer keeps them on a separate line, below NOI and below debt service, so you can see both truths at once: what the property earns in a normal year, and what you actually keep once you set money aside for the next big item.
Cap rate, cash-on-cash, and what a loan does to both
Cap rate is NOI divided by price. It ignores financing, so it lets you compare properties fairly. Cash-on-cash return is your yearly cash flow divided by the cash you put in. It includes the loan, so it tells you whether the deal works for you.
A loan helps only when the property earns more than the loan costs. The useful comparison is the cap rate against the loan’s yearly payment as a percentage of the loan, sometimes called the loan constant. When the cap rate is lower, more borrowing makes cash flow worse, not better.
An illustrative example, not a local estimate
A hypothetical $800,000 property renting for $3,600 a month, 5% vacancy, $7,200 tax, $1,600 insurance, 8% maintenance and 8% management, a 6.75% 30-year loan and $10,000 closing costs. NOI is $25,674, a cap rate of 3.21%. The loan constant at 6.75% is about 7.78%, higher than the cap rate, so each step of leverage lowers the return.
| Same property | Cash invested | Yearly debt service | Yearly cash flow, before reserves | Cash-on-cash |
|---|---|---|---|---|
| All cash | $810,000 | $0 | $25,674 | 3.2% |
| 50% down | $410,000 | $31,133 | −$5,459 | -1.3% |
| 25% down | $210,000 | $46,699 | −$21,025 | -10.0% |
Every figure in this example is invented to show the mechanics. It does not describe any real property or current rents.
Run the numbers on your terms
Enter the property, the loan and a rent you have verified. The analyzer shows the result three ways: the base case, a conservative and an optimistic case you define, and how sensitive cash flow is to the inputs that move most.
Rental property analyzer
Assumptions visibleFrom rent to cash flow, yearly
The full calculation, yearly
- Gross scheduled income
- Effective income after vacancy
- Operating expenses
- Net operating income (NOI)
- Debt service
- Cash flow before reserves
- Capital reserves
- Cash flow after reserves
- Cash invested
- Cap rate on total cost
- Debt service coverage (DSCR)
Three scenarios
Monthly cash flow after reserves, by rent and rate
Rows change the rent you entered; columns change the interest rate. The outlined cell is your base case.
Monthly cash flow after reserves, by vacancy and maintenance
Assumptions and limits
- NOI is effective income minus operating expenses. It excludes debt service and capital reserves, which is how cap rate is defined.
- Cap rate is NOI divided by purchase price. “Cap rate on total cost” divides by price plus closing costs and repairs.
- Cash-on-cash is yearly cash flow after reserves divided by the cash you put in: down payment, closing costs and repairs. Treat reserves as optional by setting them to zero, but know what that hides.
- DSCR is NOI divided by debt service. Many investment lenders look for at least 1.20 to 1.25; check your lender’s rule.
- Maintenance and management are percentages of collected rent. Vacancy is a percentage of scheduled income.
- There is no appreciation, rent growth, tax benefit or sale in this model, on purpose. It answers one question: does the property carry itself?
- Every default is an example, not local market data. The rent especially must come from your own verified comparables or an actual lease.
Have a specific property? Send the address or listing and this analysis. We will check the rent assumptions against what we can verify, and review HOA and city rules for that parcel.
Review the property with us
The appreciation trap
The analyzer assumes no appreciation and no rent growth. That is a choice, not an oversight. A property that only works if it rises in value is a bet on the market, financed by your monthly cash.
Appreciation can happen, and over long periods it often has in this region. It has also stalled and reversed for years at a time. If negative cash flow is the plan, decide in advance how many years you can carry it, from what account, and what happens if rates, insurance or HOA dues rise along the way.
The useful questions are concrete: what would the rent need to be to break even, how long could you hold through a vacancy, and what is your exit if you need one.
What to verify before it is an investment
The numbers can be right and the plan still fail, because the building, the city or the state does not allow it.
- HOA rental rulesMany associations cap the number of rented units, require minimum lease terms, or prohibit short-term rentals. Read the declaration, bylaws and rules, and ask whether any amendments are in progress.
- Short-term rentalsCities regulate them. Seattle requires short-term rental operators to be licensed, and other cities have their own rules. Check the city where the property sits, then the HOA.
- Rent increasesWashington limits annual rent increases for most residential tenancies, under a 2025 law (HB 1217): the cap is 7% plus inflation, or 10%, whichever is lower, with some exemptions, including for newer buildings. Notice requirements apply. Read the law or ask an attorney before setting a rent plan.
- Landlord-tenant lawWashington’s Residential Landlord-Tenant Act sets rules on deposits, entry notice, repairs and terminations. Some cities, Seattle in particular, add their own requirements.
- Accessory dwelling units and middle housingState laws passed in 2023 (HB 1337 and HB 1110) expanded where cities must allow ADUs and more homes per lot. Each city adopts its own code and timeline. Before you count on a second unit, confirm with the city’s permit center for that parcel: lot size, setbacks, parking, critical areas, utilities and any covenants.
- Permits on what is already thereA basement unit or converted garage without permits is not legal rental income, and it can be an insurance and lender problem. Ask for permit history.
Read the source
- HB 1217 (2025), rent stabilizationWashington State Legislature
- RCW 59.18, Residential Landlord-Tenant ActWashington State Legislature
- HB 1337 (2023), accessory dwelling unitsWashington State Legislature
- HB 1110 (2023), middle housingWashington State Legislature
- Like-kind exchanges, real estate tax tipsInternal Revenue Service
We are real estate brokers, not attorneys or tax advisors. These summaries point you to the source; they are not legal or tax advice. Sources checked November 2026.
Selling one investment to buy the next
A 1031 exchange can defer tax on the gain when you sell an investment property and buy another. The calendar is strict and does not stop for weekends: you identify replacement properties within 45 days of closing the sale, and complete the purchase within 180 days.
1031 exchange deadlines
CalendarAssumptions and limits
- The 45-day identification and 180-day exchange periods run in calendar days, including weekends and holidays, from the closing of the property you sold.
- The 180-day period ends earlier if your tax return for that year is due first, unless you file an extension.
- An exchange needs a qualified intermediary in place before the sale closes. This tool is a calendar, not tax advice; confirm with your tax advisor and intermediary.
Planning an exchange? We can line up replacement properties to review well before day 45.
Plan the searchNext step
Two sets of eyes before one signature.
- 01Send the address or listing, and the analysis if you ran one here. It attaches to your message automatically.
- 02We check what we can verify: tax record, HOA documents and rental rules, permit history, and recent sales.
- 03You get our read in writing: which assumptions look solid, which look optimistic, and what to ask before you offer.
- Phone425.974.9985
- Emaillydie@casaliv.co
- BrokerageKelly Right RE of Seattle LLC