The Secret Formula for Calculating REI Profits

MAO Formula ( Maximum Allowable Offer): ARV x 70% minus repairs.

For investing, use the 70% rule to cap your purchase price. This reserves 30% for gross profit, holding costs, and closing fees. ARV = after repaired value which is the estimated market value after full renovation.

NOI (Net Operating Income): Income minusExpenses

Cap Rate: NOI divided by Property Value. Measures income strength of the asset

Cash on Cash: Annual Cashflow divided by Total Cash Invested x 100. Tracks cash return on investment

Criteria for a Good Investment For rental properties, evaluate these benchmarks to confirm profitability:

·1% Rule: Monthly gross rent should equal at least 1% of the total purchase price plus repairs (e.g., $2,000/mo rent for a $200,000 property).

·Cash-on-Cash Return: Aim for an 8%–12%+ annual cash return on the actual down payment and capital invested.

·Positive Net Cash Flow: Secure $200+ per door/month after subtracting mortgage, taxes, insurance, vacancy, maintenance, and property management fees.

·Location Fundamentals: Target areas with strong job growth, declining vacancy rates, and landlord-friendly laws.

A property is a good deal when your purchase price stays at or below the MAO while meeting your cash-flow and yield thresholds.

Plug your numbers into the Cashflow Analyzer right now to instantly uncover your true profits and lock in your Maximum Allowable Offer before someone else beats you to it!