Clear definitions, practical examples, and how each term is used in your property analysis.
Start with Cash Flow, NOI, DSCR, and Cap Rate. You do not need to learn every term before exploring a property.
Definitions describe the current ProformaPilot models. Examples are illustrative. Lender calculations can differ. If you opened this page from an analysis, close this tab to return to your work.
45 terms explained
An additional home on the same property as a main residence, such as a backyard unit or converted garage.
Track its rent, size and costs separately in the dwelling schedule. A property record or unit count does not verify permits, rental eligibility or whether a lender will accept its income.
A main home renting for $2,400 plus an included ADU at $1,600 produces $4,000 of scheduled monthly dwelling rent.
The schedule for paying down a loan through principal and interest payments. The repayment period affects the payment size.
Enter the number of years used to calculate payments. A loan’s maturity can differ from its amortization period, so verify any balloon payment separately.
A 30-year amortization spreads repayment over 360 monthly payments.
The estimated value after planned repairs or improvements are complete. It is an assumption to verify, not a promised resale price.
Analyze Deal uses ARV to size the LTV-based refinance limit and equity-based offer ceiling. Rental Analysis asks for a separate assumed value when you add refinancing.
A $300,000 purchase may have a projected $400,000 ARV after renovation, but the lender’s valuation may differ.
The estimated occupancy needed for income to cover modeled costs, reserves and debt payments. It helps show how much vacancy the property can absorb.
Rental Analysis solves for coverage after its variable expense percentages, including reserves. It assumes rent and other modeled income change with occupancy. Above 100% means full occupancy would still not cover the modeled costs.
A result of 90% means the model needs about nine-tenths of potential income to cover costs.
Buy, Rehab, Rent, Refinance, Repeat: a strategy that aims to improve a rental and refinance some of the invested cash.
Analyze Deal evaluates a renovation-and-refinance case. Cash recovery depends on actual costs, rent, lender terms and valuation; the model does not guarantee you can repeat the strategy.
After renovating and renting a property, an investor may refinance to recover part of the initial cash.
Your saved investment criteria, such as desired cash flow, cap rate, debt coverage and limits on cash left in the deal.
Analyze Deal uses the chosen buy box to score the property and calculate offer ceilings. Rental Analysis presents returns without that grade or maximum offer.
A buy box might target $300 monthly cash flow and 1.25× DSCR; these are your criteria, not universal investment rules.
Annual NOI divided by a property’s price or cost. It compares operating income with the amount invested in the property, before financing.
The purchase-price version divides NOI by purchase price. Cap Rate On Cost uses total modeled project cost. Rental Analysis uses NOI before reserves; Analyze Deal uses NOI after its reserve allowance. A cap rate is not a total investment return. Compare Deals uses an after-reserve yield on cost for both workflows.
$24,000 annual NOI ÷ $400,000 purchase price = a 6% cap rate.
Money budgeted for major future replacements, such as a roof or heating system. It reduces spendable cash even if no replacement happens this month.
The recurring reserve is separate from initial repair costs and initial cash reserves. Rental Analysis applies the percentage to income after vacancy; Analyze Deal applies it to scheduled income.
Setting aside $150 a month builds a $1,800 annual replacement budget.
Money left from property income after the modeled costs and loan payments. A negative result means the property needs additional cash.
Both workflows include operating expenses, the entered reserve allowance and modeled debt payments. Rental Analysis starts with purchase financing; Analyze Deal shows the refinance scenario. These are estimates before income taxes.
$2,800 of monthly income − $1,000 of costs and reserves − $1,500 of debt payments = $300 monthly cash flow.
Your modeled project cash still invested after refinance proceeds and costs. It helps show how much capital remains tied up.
Analyze Deal subtracts net refinance proceeds before acquisition-loan payoff from total project cost. A low or negative amount is not a guarantee of profit or lender approval.
$300,000 project cost minus $250,000 net refinance proceeds leaves $50,000 invested.
Refinance proceeds left after the entered closing costs and existing loan payoff. This is borrowed cash, not operating profit.
In Rental Analysis, a negative result is displayed as additional cash required. It does not change the original purchase cash-on-cash calculation.
A $300,000 new loan less $240,000 payoff and $6,000 costs releases $54,000.
The estimated money you need to fund the purchase and setup after accounting for the purchase loan.
Rental Analysis includes down payment, purchase costs, repairs, holding costs and the initial reserve. It does not assume refinance proceeds are available at purchase. In Analyze Deal, cash needed before refinance excludes an initial reserve and uses the acquisition loan.
$100,000 down payment + $8,000 closing costs + $20,000 repairs + $5,000 reserves = $133,000 before any other costs.
Annual modeled cash flow divided by the cash remaining invested after refinance. It helps describe ongoing income relative to the remaining capital.
Analyze Deal uses annual refinance cash flow and cash left in the deal. The ratio is not meaningful when cash left is zero or negative; review the actual cash amounts in that case.
$6,000 annual cash flow divided by $50,000 remaining invested equals 12%.
Annual cash flow as a percentage of the cash you put into the purchase. It helps evaluate the cash return on your own funds.
Rental Analysis divides annual cash flow by total cash required, including the initial cash reserve. It excludes appreciation, loan paydown and sale proceeds. It is not calculated when the cash denominator is zero.
$6,000 annual cash flow ÷ $100,000 cash required = a 6% annual cash-on-cash return.
Fees and transaction costs paid to complete a purchase or refinance, separate from the down payment.
Purchase closing costs use purchase price; refinance closing costs use the new loan amount. Include costs once and review actual quotes before relying on the budget.
A 2% purchase closing-cost estimate on $400,000 is $8,000.
Your assessment of how well the inputs have been checked. It helps identify a case that needs more research.
Analyze Deal uses the entered confidence level in its score and verification flags. It is not a statistical probability, independent certification or prediction accuracy.
Verified leases and written cost quotes may support more confidence than unreviewed estimates.
The payments required on a loan. Principal pays down the balance; interest is the cost of borrowing.
ProformaPilot models principal and interest separately from property taxes, property insurance and HOA. Rental Analysis adds entered mortgage insurance to modeled debt service.
A $1,500 principal-and-interest payment plus $80 mortgage insurance is $1,580 of modeled monthly debt service in Rental Analysis.
The part of the purchase price paid with your own funds instead of the purchase loan.
This is only one part of cash required. Closing costs, repairs, holding costs and an initial reserve may add to the cash you need.
A 25% down payment on a $400,000 purchase is $100,000.
How comfortably the property’s operating income covers its loan payments. A ratio of 1.25× means $1.25 of modeled income for each $1 of debt service.
ProformaPilot divides annual NOI by annual modeled debt service. Rental Analysis includes entered mortgage insurance in debt service; Analyze Deal uses refinance principal and interest. No modeled debt means DSCR is not applicable. Lenders may calculate income and coverage differently.
$25,000 of annual NOI ÷ $20,000 of annual debt service = 1.25×. Below 1.00× means modeled NOI does not cover the payments.
Potential rental and other income after the vacancy allowance. It is the income available to cover operating costs.
Both workflows apply your vacancy percentage to scheduled rent plus other income. This is a planning estimate rather than a guarantee of collections.
$3,000 scheduled monthly income with 5% vacancy leaves $2,850 effective monthly income.
The margin between the modeled property value and project costs that you want to preserve. It provides a planning buffer.
Analyze Deal uses the target equity cushion in its equity protection offer ceiling. It is a model target, not cash in your bank account.
A 20% target leaves 20% of the entered after-repair value outside the permitted project-cost budget.
An association that may charge dues and set rules for a property. Dues are part of your rental operating budget.
Enter regular owner-paid dues in HOA / Month. Verify special assessments and rental restrictions separately.
$300 quarterly dues equal $100 per month; a separate special assessment needs its own budget.
Costs incurred while preparing a property and finding tenants before normal rental operations.
The model multiplies entered months by monthly holding costs and adds the result to project cost. Include expected interim financing costs here when appropriate.
Three months at $1,200 a month adds $3,600 to the project budget.
A modeled purchase-price limit based on the property’s income and your target cap rate. It is one of the three offer ceilings in Analyze Deal.
Analyze Deal divides NOI by the target cap rate to find a supported total project cost, then allows for repairs, holding costs and acquisition fees to solve for purchase price.
$20,000 NOI at a 5% target supports $400,000 of total project cost before solving for purchase price.
Cash set aside at purchase to provide a buffer for ownership. It is separate from the recurring capital-reserve allowance.
Rental Analysis includes this amount in cash required and the cash-on-cash denominator. It is not treated as a recurring monthly operating expense.
An initial $10,000 buffer increases cash needed at purchase by $10,000.
The annual rate charged for borrowing money. It influences the monthly loan payment.
Enter the note rate, not APR. APR also reflects certain borrowing costs. Model lender fees through the appropriate closing-cost or points fields.
At the same loan amount and term, a higher interest rate increases the modeled payment.
The amount needed to settle an existing loan when refinancing. It may include more than the current principal balance.
Enter the expected lender payoff in the rental refinance scenario. The initial suggested amount is the modeled purchase loan, without automatic paydown.
A $250,000 new loan less $200,000 payoff and $5,000 costs releases $45,000.
An upfront loan charge expressed as a percentage of the loan amount. It increases the cost of financing.
Analyze Deal adds acquisition points to total project cost. Confirm whether your lender’s quote already includes these fees in closing costs to avoid counting them twice.
Two points on a $200,000 loan cost $4,000.
The length of time before a loan is due to be repaid. Longer repayment schedules generally reduce each payment but extend borrowing.
Rental Analysis models a fully amortizing loan over the entered term. Interest-only periods, adjustable rates and balloon payments are not included in that calculation.
A 15-year fully amortizing loan is scheduled to be paid off after 180 monthly payments.
The loan amount as a percentage of the property’s value or the model’s stated price basis. It helps size a possible loan.
Acquisition LTV uses purchase price. Refinance LTV uses your entered property value or after-repair value. Analyze Deal also limits the refinance loan by its DSCR target.
$300,000 loan ÷ $400,000 value = 75% LTV.
Routine upkeep and smaller repairs that keep the rental usable. It is separate from major replacement reserves.
Budget a percentage of income. Rental Analysis uses income after vacancy; Analyze Deal uses scheduled income. Avoid entering the same repair in more than one budget.
Fixing a leaking faucet is usually routine maintenance; replacing the entire roof belongs in a larger project or reserve budget.
An estimate of what a property could rent for under current market conditions. It can differ from an existing lease.
Use local evidence and the property’s condition to review rent estimates. Provider estimates are suggestions; dwelling rent is counted only when you include it in the analysis.
A current lease may pay $1,800 even if comparable rentals suggest $2,000.
A modeled purchase-price limit based on your assumptions and selected investment targets. It is not an appraisal or seller valuation.
Analyze Deal chooses the lowest of its equity protection, income value and refinance recovery ceilings. Changing targets, value, rent or costs changes the result. Rental Analysis does not assign an offer ceiling.
Ceilings of $220,000, $200,000 and $190,000 produce a modeled maximum of $190,000.
Insurance that protects the lender against certain losses if the borrower defaults. The borrower may pay for it.
Enter its monthly cost separately from property insurance. Rental Analysis includes it in payments, cash flow and debt coverage when a loan is modeled.
An $80 monthly charge reduces annual modeled cash flow by $960.
Income left after vacancy and operating costs, before loan payments and income taxes. It helps compare the property’s operations separately from financing.
Rental Analysis shows NOI before capital reserves. Analyze Deal includes its capital-reserve allowance in operating costs, so its NOI, cap rate and DSCR use income after that allowance. Compare figures only when expense definitions match. Compare Deals standardizes the displayed net income after reserves for both workflows.
$36,000 of income after vacancy − $14,000 of operating costs = $22,000 of NOI before reserves.
The difference between the modeled maximum offer and the seller’s asking price. It highlights a possible pricing gap.
Analyze Deal subtracts asking price from its recommended maximum. A negative number means the asking price is above the modeled limit.
$200,000 maximum − $230,000 asking price = −$30,000 headroom.
Recurring costs to run the rental, such as property taxes, insurance, management, maintenance and owner-paid utilities.
Purchase costs and loan payments are separate. Rental Analysis separates capital reserves from operating expenses; Analyze Deal includes the reserve allowance in its operating-cost total.
An owner-paid water bill is an operating expense; a down payment is not.
A local agency that administers housing assistance programs. Its rent-related figures require local review.
The PHA rent field is a user-entered assumption. A payment standard or HUD benchmark does not establish an approved contract rent or guarantee payment; verify local rent reasonableness and utility rules.
Use a locally verified rent assumption rather than treating a published benchmark as approved rent.
The allowance for managing the rental, including tasks such as tenant communication and rent collection.
The management percentage uses income after vacancy in Rental Analysis and scheduled income in Analyze Deal. Include additional leasing or service fees separately if applicable.
An 8% management allowance on $2,500 of applicable monthly income is $200.
Replacing existing financing with a new loan. This can change the payment and may release cash after costs and loan payoff.
Rental Analysis treats refinance as an optional separate scenario. Analyze Deal uses refinance as a central part of its investment model. Both depend on the values and loan terms you enter.
A larger new loan does not necessarily improve cash flow because its payment may also be larger.
A modeled purchase-price limit intended to keep cash left in the deal within your chosen percentage after refinancing.
Analyze Deal uses net refinance proceeds, your maximum cash-left percentage and project costs to solve for this ceiling. It assumes the modeled refinance is available.
With $270,000 net refinance proceeds and a 10% maximum cash-left target, supported total project cost is $300,000.
The planned cost to repair or improve the property. It is an upfront project budget rather than routine annual upkeep.
Include each main-home or ADU project once. The model adds shared and dwelling project budgets before applying the contingency.
A $20,000 repair budget with 10% contingency becomes $22,000.
Extra money budgeted for unexpected project costs. It adds a cushion to the renovation estimate.
ProformaPilot applies this percentage to the combined shared and dwelling project budget. It does not cover every possible overrun.
A 10% contingency on $30,000 adds $3,000.
The modeled purchase and setup budget before deducting financing. It is different from the cash you personally contribute.
Both workflows add purchase price, closing costs, repairs with contingency and holding costs. Analyze Deal also adds acquisition points. Rental Analysis tracks initial cash reserves outside project cost.
$300,000 purchase + $10,000 closing costs + $30,000 repairs + $5,000 holding costs = $345,000 project cost.
A budget reduction for time without paying tenants or income not collected. It lowers expected income before expenses.
Enter a percentage of scheduled income. It is separate from repair or lease-up costs before normal operations begin.
A 5% allowance on $36,000 annual scheduled income reduces the budget by $1,800.
Try An Example or read How It Works to see the calculations in context.
For additional mortgage terminology, see the CFPB mortgage glossary (new tab). For an example of a lender-specific coverage definition, see Fannie Mae’s DSCR definition (new tab).