What calculator do you use before buying a rental property?

[Marjo Naci]

If you use one.

[Nathan Gesner]

Quote from @Marjo Naci:

If you use one.

 I'm not big on number crunching. I started out using the Biggerpockets calculator. After a few deals, I realized the numbers weren't that important to me. I switched to a napkin analysis and it works fine.

I start with total income. I divide that by half. I subtract mortgage and interest. Anything left over is my cash flow. 

Example:

Property for $400,000 with 20% down, amortized for 30 years at 5% interest

Total income $3,600

50% of income = $1,800

Mortgage is $1718

That only leaves $80 cash flow, which isn't worth it. However, I'm a property manager in this area and know the rents were at least $100 low on each unit. I can manage them myself, saving 10% every month. I already have a healthy reserve and strong income, so I don't need to set aside as much for capex. Long story short, I've owned it for three years and my cashflow is nearly $200 per unit and it's gained at least 50% in appreciation.

Crunching numbers won't give you the whole picture. You have to consider your market, potential improvements, what you bring to the game, etc. I'm able to evaluate on a napkin because I know my market and my situation. If I used the same technique to buy a C-class property in Cleveland, I would probably lose my shorts because I don't know the market, they may have heavier turnover, I have to pay a manager, etc.