What Every Number in a Rental Investment Analysis Is For
A real rental analysis has a couple dozen inputs, and if you've ever stared at one, half of them look like busywork. They're not. Every field is a lever, and most of them can swing a deal from "great" to "money pit" on their own. The ones people skip are usually the ones that matter most, which is exactly how a place that looked fine on a napkin turns into a monthly bill.
I built the calculator this walks through, aimed at San Diego, where the math is tighter than most of the country and small assumptions do real damage. If you're weighing your first rental, or your first few, this is for you. You don't have to master every line to buy well, but you should know what each one is doing before you trust the number at the bottom. So here's what each field is, why it matters, and what the model does with it. No single deal dragged all the way through, just the fields and what they're for.
What you put in to buy it
The purchase price is the anchor. Almost everything scales off it: your loan, your property tax, the slice of the building you get to depreciate, and the projected sale price down the road. In California it does one extra thing people forget. Your purchase price becomes your assessed value under Prop 13, which locks in your property tax for as long as you own the place. Buy at the top and you're paying tax on the top for twenty years.
Down payment splits that price into your cash and the bank's loan. This is the quiet lever most people underset. Put more down and your loan shrinks, your payment drops, and the thing is closer to cash flowing. Put less down and you keep cash in your pocket but the monthly bleeds. There's no free answer here, just a trade between cash tied up and cash flow, and the model shows you both sides of it.
The interest rate sets your mortgage payment, and it's the single biggest swing on whether a deal works. One point on a $500,000 loan is worth roughly $300 a month, which is often the entire difference between break-even and feeding it. A loan on a rental you don't live in also prices above the headline. When a well-qualified owner-occupant is seeing about 6.5% (Freddie Mac had the 30-year fixed at 6.43% the week ending July 2, 2026), the investor version is usually half a point or more higher. Use the owner-occupant rate on a rental and you've already lied to yourself.
Loan term is the other half of the payment. A 30-year loan keeps the monthly low and cash flow alive, but you pay far more interest and build equity slowly. A 15-year flips that. The model runs the payment schedule for whichever you pick and tracks how fast the loan balance falls, because that slow paydown is a real, if easy to miss, part of your return.
Two smaller entry costs round it out. Closing costs are money you'll never see again as equity, and the model adds them to your total cash in, which raises the bar every return has to clear. Upfront rehab does something nicer: it adds to your cash in too, but it also adds to the amount you get to depreciate, so the money you spend making the place rentable earns a small tax benefit over time.
What it earns
Gross rent is the top line and the easy part. The model grows it every year by your rent-growth assumption and runs everything downstream off it. Other income (parking, laundry, storage, pet fees) is minor, and the model treats it like rent.
The honest part is vacancy. Even a great place sits empty between tenants, and you plan for it whether or not it bites you this year. The model takes a percentage off gross rent to get your effective gross income, which is just the rent you can actually count on once you allow for the empty stretches. That's the number the rest of the math uses. Right now in San Diego a 5% haircut isn't padding, it's the market: Kidder Mathews put county multifamily vacancy at 5.4% in Q1 2026, with rents flat to slightly down as new supply opens up. Plug in zero vacancy and you're not being optimistic, you're being wrong.
What it costs to run
These are the costs of actually running the place. On paper each line is small; together they're usually the difference between a deal that works and one that doesn't.
Property tax runs a little over 1% of your price in San Diego (the base 1% plus voter-approved bonds and assessments), and the model grows it each year. Insurance is small but climbing, in a state where carriers have gotten jumpy. HOA is zero for a house and very much not zero for a condo, where it can be the single line that sinks the deal. Property management at around 8% of rent is one to put in even if you plan to self-manage, because your time isn't free and the day you get busy or move, you're paying someone that 8%.
Then the two lines that separate people who've owned a rental from people who've only modeled one. Maintenance covers the routine stuff, a running toilet, a dead disposal, paint between tenants, and it's deductible in the year you spend it. The CapEx reserve is different, and it's the field I sweat most when I run a deal. It's cash you set aside for the big replacements that don't happen yearly but always happen: roof, HVAC, water heater, the twenty-year-old kitchen. Two things make it sneaky. It's real money leaving your account, so it drags your cash flow, and it is not tax-deductible the year you set it aside, so it doesn't even soften your tax bill. Leave it out of your model and every deal looks better than it is, right up until the compressor dies. There's a companion field for how much of that reserve you actually spend over the hold, because whatever you don't spend comes back to you at sale.
The assumptions about the future
Three growth rates decide whether any of this pays off, and they're the easiest place to lie to yourself.
Rent growth and expense growth compound your income and your costs over the hold, and the gap between them matters more than either alone. If rents rise 3% while costs rise 2.5%, a deal that's underwater on day one slowly claws its way toward break-even. Appreciation is the big one, because in a deal like this it's doing almost all the work. It sets your sale price, and the sale is where the money is. That's also why it's the most dangerous input in the whole model. San Diego prices have been roughly flat to down over the past year, so any appreciation number you type is a bet, not a fact. When the entire return leans on one figure, being optimistic there isn't confidence, it's leverage on a guess.
The tax inputs
These are the fields people either ignore or badly overestimate, and they swing the after-tax result hard.
Depreciation is the engine. The IRS lets you deduct the value of the building, not the land, over 27.5 years, even while it's going up in value. That's why the land value percentage matters: it's the share of your price you don't get to depreciate, and in land-expensive San Diego that share is big, which means less annual shelter than people expect. The model uses it to work out your depreciable basis (the slice of the price you're allowed to write down) and your yearly deduction.
Your marginal tax rate is the rate your next dollar of income gets taxed at, and it sizes everything on the tax side: what you owe on the rental's profit, how much those paper write-offs are actually worth to you, and the benefit when parked losses eventually release. The input that surprises people is income (MAGI, basically your income as the IRS counts it), because it decides whether you can even use the paper losses this thing throws off. Here's the rule, and it matters more for a smaller investor than almost any other line: if you make under $100,000, you can use up to $25,000 of those losses against your regular income every year, which is real money back. Between $100,000 and $150,000 that allowance phases out. Over $150,000 it's zero, and the losses just get parked and carried forward until you sell, a rain check rather than a refund. Two toggles control this: active participation (being genuinely involved in the decisions, which most small landlords are) turns the allowance on, and real estate professional removes the limit entirely, though almost no one with a full-time W-2 job qualifies.
Getting out
The exit is where the return actually gets made, and where a few fields decide how much of it you keep.
Hold period is how long everything compounds, and it does more than it looks like. A longer hold spreads your fixed buy-and-sell costs across more years, gives appreciation and loan paydown time to work, and it also piles up more depreciation, which matters for the next field. Selling costs, around 6%, come straight off your sale price. Then two taxes. Depreciation recapture is the one nobody warns you about: all that depreciation you deducted gets taxed back when you sell, at up to 25%. Depreciation feels like free money going in, and the IRS quietly takes a cut of it on the way out. Capital gains tax hits your actual profit, meaning the sale price above your basis (roughly, what you paid plus what you put into the place). The model runs all four against the sale so the number you see is what lands in your account, not the sticker price on the sign.
Reading what it hands back
Put the inputs in and the model gives you a stack of outputs. Each answers a different question, and only one of them is your actual return.
Cash invested is your down payment plus closing plus rehab. It's the denominator, the number every return is measured against, and it's why "5% return" is meaningless until you know 5% of what.
You get two versions of net operating income, which is just rent minus operating costs before the mortgage. Cash NOI subtracts every real dollar including the reserve and tells you what's happening to your bank account. Tax NOI subtracts only what's deductible and feeds your tax return. You want to see both, because they answer different questions.
Then the ratios. Cap rate is the property's yield ignoring your loan, good for comparing two buildings, but it's not your return because it pretends you paid cash. DSCR asks whether the property's income covers its own mortgage; under 1.0 means it doesn't, and you're covering the gap from your paycheck. Cash-on-cash is your first-year cash flow divided by the cash you put in, your real yield in year one, and it's often negative in San Diego right now. Break-even occupancy is the percentage full you'd need just to cover costs. When it prints above 100%, there's no version of "keep it rented" that fixes the deal, because the shortfall is baked into the price and the rate.
The one that counts is after-tax IRR. It's the single annual rate that ties everything together, your cash in, every year of cash flow, and the net proceeds at sale, into one number. The equity multiple says it more simply: how many times your money you got back. Every other output is a piece of the picture, and the after-tax IRR is the whole of it.
That's the whole board. None of these fields is decoration, and the deals that blow up almost always blow up on the lines someone decided didn't matter: the reserve they skipped, the vacancy they zeroed out, the appreciation they got greedy on, the write-off they were counting on and couldn't use. You don't have to nail every number on your first deal. You do have to fill in the scary ones instead of leaving them blank, because a number that's honestly wrong you can fix later, and a number that's missing will sink you without warning. Fill in every one and the numbers can't flatter you, which is the entire point.
Rate and vacancy figures are current market references, dated inline: Freddie Mac Primary Mortgage Market Survey (30-year fixed at 6.43%, week ending July 2, 2026) and multifamily vacancy of 5.4% for Q1 2026 attributed to Kidder Mathews, via a San Diego rental market summary. Tax treatment (depreciation over 27.5 years, the $25,000 passive-loss allowance and its $100,000 to $150,000 income phaseout, depreciation recapture, capital gains, California's Prop 13 reassessment at purchase) reflects rules as of 2026 and is general information, not tax advice. Confirm your own numbers with a CPA.
