INVESTING / THE NUMBERS
A $2,800 rent does not mean a $2,800 return.
A simple worked example for checking the costs between advertised rent and cash left over.
The listing gives you a rent number. Your first job is to ask what sits below it. Tim Walker’s investing background and Steve Cerese’s investment-property focus make the operating plan a natural part of the Five Four conversation, not an afterthought once you like the house.
Start with a deliberately plain example
Imagine scheduled monthly rent of $2,800. Allow $140 for vacancy or collection loss and effective income becomes $2,660. Subtract $900 of assumed operating costs and $1,500 of debt service. Set aside another $200 for capital work. The remaining cash is $60.
These are invented teaching figures, not local rent, expense, or financing estimates. Their purpose is to expose the calculation. For an actual property, replace every assumption with a quote, record, or clearly labeled estimate.
Name every cost
Break operating costs into taxes, insurance, association dues, management, owner-paid utilities, routine maintenance, and other applicable expenses. Keep major replacements visible in a separate capital plan. Avoid counting the same expense twice or leaving it out because it happens irregularly.
If you plan to manage the property yourself, price outside management anyway. That shows what happens if your time or circumstances change. Treat your cash reserve as part of the required commitment, even when you do not expect to spend it immediately.
Ask where the income came from
Is the rent an executed lease, a seller’s historical average, a comparable listing, or a projection? What period does it cover? Does a furnished or short-term example include costs your version leaves out? Document the source beside the number.
Verify the intended use, relevant licensing, and association restrictions for the specific address before treating rental income as available. Rules can differ between jurisdictions and properties.
Try a less comfortable case
Reduce rent, increase vacancy, and add an actual repair estimate. Calculate the monthly shortfall and how long your reserves cover it. A plan that works only with perfect occupancy deserves another pass.