The 5 Formulas You Need to Analyze Any Real Estate Investment

Real estate investments come in all shapes and sizes. You got flips, rental properties, commercial real estate, BRRRR (buy rehab rent refinance repeat) deals, and a dozen others. Thankfully you don’t need twenty different calculations to figure out whether any of these are good real estate deals—you only need five. These five real estate formulas are stupidly simple, don’t require a calculator (most of the time), and can be done with almost any real estate deal you come across.

If you’re trying to make a serious profit or passive income with real estate, then real estate math is about to become your best friend. Today, Tarl Yarber gives you a step-by-step guide on calculating these numbers, when to use each of them, and where novice investors usually go wrong. Calculating your real estate numbers is one of the most important steps in buying real estate, so feel free to rewind and replay as much as you’d like.

Don’t like manually calculating out numbers? We’ve got you covered. Click the link below to use any of the BiggerPockets real estate investing calculators for your next deal!

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Use the BiggerPockets Real Estate Calculators on Your Next Property:
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Join BiggerPockets for FREE 👇
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Check out Last Week’s Episode on Tarl’s Biggest Flipping Mistakes:
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What Are Cap Rates and How Are They Calculated?
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How to Calculate Cash-on-Cash Return:
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Rental Property Numbers So Easy You Can Calculate Them on a Napkin:
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Connect with Tarl on BiggerPockets:
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Follow Tarl on Instagram:

00:00 5 Real Estate Formulas Every Investor Should Know
01:10 1. Cash on Cash Return
09:05 Where Most Investors Get CoC Wrong
14:15 2. Net Operating Income (NOI)
18:09 3. Capitalization Rate (Cap Rate)
24:20 4. DSCR (Debt Service Coverage Ratio)
30:05 5. Max Purchase Price (MPP)
33:21 Run the Numbers BEFORE You Buy!

#biggerpockets #tarlyarber

[kristina]

This is the bomb. I sure appreciate these financial types of videos and not just the fluff stories. This is how you really win with real estate.

[emilylagrange]

Extremely insightful. Appreciate this video. Ty!

[knowledgeforlongevity]

We LOVE VIDEOS LIKE THESE.. keep it up please

[timtaylor]

Had a listing agent give me his calculated Cap Rate of 6.2% on a property last week. Ran my own numbers and got about 4.2%. The agent said since they didn't have to do any major maintenance in the last two years, they put $0 in for long term maintenance in his calcs. So many agents are clueless.

[antoniostephano]

Tha k you for explaining that the actual cap rate is often (and confusingly) used interchangeably with the market cap without any acknowledgement of the difference. It took a while for me to figure this out. I hope your clear explanation helps prevent confusion for new investors.

[josephkibler]

Love the explanations however can anyone explain what numbers to use for a BRRRR regarding Project C on C? Just use year 1 or analyze additional years as rents raise, Property Management is at least 10% less (assuming low turnover), and Cap Ex comes into play.

[bigdope]

Thanks for the tutelage I greatly appreciate this!!! Go BiggerPockets Go!!

[macjusss]

if 3% Actual return is bad, what is a good target to aim for?

[AlseeMcCray]

net income is the same as cash flow right?

[edgarg]

What is a good % for each of the formulas? For example, what’s considered a strong actual CoC return %?

[JevonMusicGroup]

Good info. Question... I'm usually looking for around 12% "actual" CoC return... what's a good number to aim for with "project" CoC return?

[ZuuDini]

I’m 2mins in does this work on multi family’s?

[emaze]

How’d you get 300K from 250k + 50K in the example around the 11:00 min mark. For the project CoC. What am I missing ?

[vhutch]

so is this basically just levered vs. unlevered CoC????

[Zudjy]

where can i find the shirt he has got on in this video?? lol

[RavBarring]

This is a fantastic tutorial. Thank You for your generosity in sharing your wealth of knowledge and experience.

[fstlniw]

I don’t think that you should call it a cash-on-cash project return. It really should just be called a project return. Cash means out of pocket—your down payment.

[NovocaeN]

After this video I on another level, thanks teacher from Moscow😊

[AlseeMcCray]

how do u buy for 200k put in 50 k but you saying 300k?

[shanilmeghani]

10:12 200k +50k = 250K not 300k. Did I miss something?