Metric Definitions – What Each Number Actually Means

Profitability

Cash flow, NOI, ROI, IRR — the metrics that tell you how much money the property can make.

Stability & Risk

DCR, vacancy, expense ratios, and break-even measures — how resilient the deal is when things change.

Leverage

LTV, debt ratios, and paydown — how your financing structure affects risk and return.

Long-Term Growth

Equity build, appreciation, 5-year returns — where the deal is likely to take you over time.

Net Operating Income (NOI)

NOI is the income the property produces after operating expenses, but before mortgage payments.

Why it matters: Lenders love NOI. It tells you how strong the asset is on its own, regardless of how you finance it.

Monthly & Annual Cash Flow

Cash flow is what’s left after expenses, financing, and reserves — the money you can actually use.

Why it matters: It’s your safety buffer and your freedom engine. Negative or razor-thin cash flow introduces stress.

Capitalization Rate (Cap Rate)

Cap Rate compares NOI to the purchase price.

Why it matters: It’s a quick way to compare properties across markets, but only tells part of the story on its own.

Cash-on-Cash Return

Cash-on-Cash shows the return on the actual cash you’ve invested into the property.

Why it matters: It answers: “For every dollar I put in, what am I getting back each year?”

Internal Rate of Return (IRR)

IRR blends cash flow, mortgage paydown, and potential appreciation into a single annualized return.

Why it matters: It helps you compare this property to other investments over time — like stocks, funds, or other real estate deals.

Debt Coverage Ratio (DCR)

DCR compares NOI to your annual mortgage payments.

Why it matters: Lenders rely heavily on DCR. A weak DCR can kill financing even if other metrics look good.

Operating Expense Ratio (OER)

OER is your operating expenses divided by your gross rental income.

Why it matters: High expenses can quietly destroy otherwise solid deals.

Vacancy & Stress Assumptions

PropVest IQ lets you build in realistic vacancy and repair assumptions.

Why it matters: Deals that only work at 0% vacancy aren’t really deals — they’re hopes.

Break-even Metrics

Break-even tells you how far income can fall, or expenses can rise, before the property stops covering itself.

Why it matters: This is your stress-test. It helps you plan for worst-case scenarios instead of just best-case.

Loan-to-Value (LTV)

LTV is your loan amount divided by the property value.

Why it matters: Higher LTV means more leverage — and more sensitivity to changes in value or cash flow.

Mortgage Paydown

Every mortgage payment includes principal. That principal reduction builds equity automatically.

Why it matters: Even modest cash-flow deals can quietly build significant wealth through paydown.

Equity Growth

Equity growth combines your original down payment, mortgage paydown, and any change in property value.

Why it matters: This is the “true wealth” side of real estate investing.

5-Year & Total Return on Investment

This looks at what you’ve received (cash flow) plus what you’ve built (equity) compared to what you invested.

Why it matters: It helps you compare a property with other uses of your capital over a realistic time frame.