The rental property metrics that actually matter
7 min read
A handful of numbers do most of the work when you're judging a rental. Here's the short list every landlord and investor should know, what each one is really telling you, and where each one falls short.
NOI — net operating income
NOI is rental income minus operating expenses (taxes, insurance, management, repairs, utilities, vacancy) — before the mortgage, depreciation, and capital improvements. It's the engine every other metric is built on.
Get NOI right and cap rate, DSCR, and valuation all fall into place. Get it wrong — by missing vacancy or lumping in a new roof as an operating cost — and every downstream number is off.
Cash-on-cash return — the one that pays your bills
Cash-on-cash is your annual pre-tax cash flow (NOI minus debt service) divided by the actual cash you put in (down payment, closing costs, rehab). It's the return you actually feel, because it accounts for your mortgage.
Where cap rate assumes all-cash, cash-on-cash reflects leverage. A 6% cap-rate deal can be a 10%+ cash-on-cash return with the right financing — or a negative one if the loan is too heavy.
Quick screening ratios: GRM and the 1% rule
Gross rent multiplier (GRM) = price ÷ gross annual rent — a fast back-of-envelope way to compare listings before you dig into expenses. Lower is generally better.
The '1% rule' is a rule of thumb that monthly rent should be at least ~1% of purchase price. It's a screen, not a verdict — useful to filter a list quickly, never a substitute for running the real numbers.
DSCR — will the property carry its loan?
Debt service coverage ratio = NOI ÷ annual debt service. Lenders use it to decide if a property's income covers its mortgage; many want 1.20–1.25 or higher (income is 120–125% of the loan payment).
Below 1.0 means the property doesn't cover its own debt from operations — a red flag for both lenders and owners. DSCR is where your amortization schedule (principal + interest) and your NOI meet.
Where the numbers come from
Every one of these metrics traces back to two things you should already have clean: accurate per-property income/expenses (for NOI) and an accurate loan schedule (for debt service and DSCR).
That's the practical payoff of real books: Rentwelly's per-property P&L feeds NOI, cap rate, and cash-on-cash, and its loan module gives the exact principal/interest split for DSCR — so these ratios come from your ledger, not a spreadsheet you have to trust.
See it in your own books
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