These are the numbers that decide whether a deal is good or bad. Learn them cold before your first offer.
DSCR — Debt Service Coverage Ratio
Gross Rent ÷ PITI
Measures how well rental income covers your mortgage payment (PITI = principal, interest, taxes, insurance). Lenders use this to qualify DSCR loans instead of your income.
✓ Target: 1.10 or higher to qualify for most DSCR loans
Cash-on-Cash Return (CoC)
Annual Cash Flow ÷ Total Cash Invested
How much annual cash flow you earn as a percentage of the cash you put into the deal (down payment + closing costs + rehab). The most important return metric for cash-flow investors.
✓ Target: 6% or higher for a solid cash-flow deal
Cap Rate — Capitalization Rate
Annual NOI ÷ Purchase Price
Returns a property would generate if you paid all cash — no mortgage. Used to compare properties regardless of financing. NOI = rent minus operating expenses, not including mortgage payments.
✓ Target: 5–6%+ for Fort Worth single-family
NOI — Net Operating Income
Eff. Gross Income − Operating Expenses
Annual rental income after vacancy and operating expenses, but before mortgage payments. The core income number used to value commercial and multi-unit properties.
✓ Higher NOI = more valuable property, better cap rate
GRM — Gross Rent Multiplier
Purchase Price ÷ Annual Gross Rent
A quick back-of-envelope check. Divide the price by the annual rent. Lower is better — a GRM of 10 means the property costs 10 years of rent. Useful for quick screening before running full numbers.
✓ Target: 10x or below for cash-flow markets
PITI — Monthly Housing Payment
P&I + Taxes + Insurance + HOA
Your total fixed monthly cost as a landlord — the number rent must cover before you break even. The DSCR lender will calculate this exactly. Taxes and insurance are usually escrowed monthly.
✓ Know your PITI before you make any offer
The 1% Rule
Monthly Rent ≥ 1% of Purchase Price
Quick screening rule — monthly rent should be at least 1% of the price. A $200k property needs $2,000/month rent to pass. Hard to hit in DFW at current prices, but it's a useful filter to find underpriced opportunities.
✓ Use as a quick screen, not a final decision
Effective Gross Income (EGI)
Gross Rent × (1 − Vacancy Rate)
Gross rent adjusted for expected vacancy. In a healthy FW market, use 5–8% vacancy (one to two months vacant per two-year lease cycle). Never underwrite at 0% vacancy — that's optimism, not analysis.
✓ Always run numbers with 7–8% vacancy minimum
CapEx Reserve
5–10% of rent set aside monthly
Money saved each month for big future expenses: HVAC ($4–8k), roof ($8–15k), water heater ($1–2k). New investors skip this — then get blindsided. Build it in before the deal looks good, not after.
✓ Never underwrite below 5% CapEx reserve