Six ways to make money on a property — and the one number that decides each.

Buy & Hold

You buy a property, rent it out, and keep it. The rent covers the mortgage and the running costs; whatever is left over each month is yours, and the tenant slowly pays down the loan on your behalf. It is the slowest of these strategies and the one with the fewest ways to go badly wrong.

The math that decides it

Everything starts with net operating income — the rent, minus everything except the mortgage.

From NOI, four numbers follow, and each answers a different question.

What to watch

• DSCR below 1.00 — the rent does not cover the mortgage and you are funding the property out of pocket every month. Lenders on investment property commonly look for 1.20 or better.
• Cash-on-cash below the cap rate — your borrowing costs more than the property yields. The loan is working against you rather than for you. This is negative leverage, and it is a financing problem, not a property problem.
• A break-even ratio near 100% — the property only works when it is fully occupied. One turnover and the year is gone.
• Missing line items — a rental with no vacancy, maintenance, management or capital reserve budgeted is not a good deal, it is an incomplete one. Those costs arrive whether or not you wrote them down.

Flip

You buy something that needs work, do the work, and sell it — usually inside six to twelve months. There is no rent and no tenant. The entire return is the gap between what you are all-in for and what it sells for, and every week you hold it that gap gets smaller.

The math that decides it

A flip is priced backwards from the resale value, not forwards from the asking price. Start with the after-repair value, subtract what you want to make and what it costs to get there, and what remains is the most you may pay.

Then the actual deal is checked against total project cost, which is a longer list than most people expect.

What to watch

• All-in above 75% of ARV — the margin for error is mostly gone. A soft market or a two-month overrun turns a profit into a loss.
• Project months — this is the number people understate. Holding costs and loan interest are charged monthly and do not care that the permit took longer than expected. Run it at your realistic timeline, then run it again two months longer.
• An ARV taken from the listing — the after-repair value should come from what comparable finished properties actually sold for, not from what the seller hopes theirs is worth.
• Return on a fully financed deal — borrowing 100% of a flip produces enormous percentage returns on almost no cash, and those percentages tell you very little. Look at the dollar profit and the margin, not the ROI.

BRRRR

Buy, Rehab, Rent, Refinance, Repeat. It is a flip that you keep. You do the same renovation, but instead of selling you refinance against the new, higher value, pull most of your cash back out, and rent the property. The cash comes back; the property stays.

The math that decides it

The whole strategy turns on one figure: how much of your cash the refinance gives back.

Once refinanced it is a rental, and it has to survive the buy-and-hold tests on the new loan — which is larger than the one it started with.

What to watch

• The appraisal — every figure above depends on an ARV that a third party has to agree with. If it comes in 10% low, the cash back falls by more than 10%, because the payoff amount does not move.
• DSCR after the refinance — you have deliberately increased the loan. A property that cash-flowed at the purchase loan may not at the refinance loan, and the lender will check this before funding.
• The seasoning period — most lenders will not refinance at the new value immediately. Budget the holding costs for that wait.
• Rate at refinance — unknown when you buy. Worth running at a rate materially higher than today's before committing.

Reverse Offer

Not a strategy for owning a property so much as a discipline for buying one. Instead of asking "is this price good?", you state the return you require and let the arithmetic tell you the highest price that delivers it. Everything above that number is someone else's deal.

The math that decides it

It runs the other calculations in reverse. Fix the return, solve for price.

What to watch

• The target you set — this is an input, not a result. Setting it at 12% because that sounds good will tell you that almost nothing is worth buying. Set it to what you could actually get elsewhere.
• Interest rate sensitivity — at high leverage a one-point move in the rate moves the maximum offer more than most people expect. Run it at a rate above your quote.
• The number is a ceiling, not a target — it is the most you may pay and still hit your return. Paying exactly it earns exactly your minimum.

Business & Commercial Acquisition

Buying a self-storage facility, a small apartment building, a retail strip or an operating business. The arithmetic is the same shape as a rental — income, minus expenses, equals NOI, divided by price, equals cap rate — but two things differ, and they matter.

What is different

Value follows income, not comparables. If you raise NOI by $10,000 in a market that prices at a 7% cap, you have created roughly $143,000 of value. The same works in reverse when a tenant leaves.

Owner labour is not free. If the seller runs the business themselves, their unpaid work is quietly inflating the profit. Whatever it costs to replace them has to come out before the income is comparable to a passive investment.

What to watch

• Payroll being replaced — deduct a real market salary for the seller's role. A business that only works because the owner works 60 unpaid hours is priced on a fiction.
• Cap rate on the exit, not just the entry — you are buying at today's cap rate and selling at an unknown one. A deal that only works if cap rates compress is a bet on the market, not on the asset.
• Tenant concentration — one tenant at 40% of income is not the same risk as ten at 4%, even at identical NOI.
• Deferred maintenance — a roof or a parking lot at the end of its life is a price adjustment, not a surprise for later.

Hold & Exit

Not a separate way to buy — a way to measure. Every other number on this page describes the first twelve months. Cap rate, cash-on-cash and DSCR are all year-one figures, and none of them answers the question people actually care about: if I buy this, keep it five years and sell it, what did I make?

The math that decides it

Three streams, added together and measured against what went in.

From those, two figures do the comparing.

What to watch

• Appreciation is a guess — and it is doing more work in the answer than anything else on the screen. Run the same deal at zero appreciation. If it only works because the market goes up, it is a bet on the market, not on the property.
• The first few years are usually under water — commission and closing costs come off the top at both ends. Selling in year one almost always loses money even on a good property, which is why the break-even year is worth looking at.
• A loan that ends inside the hold — a twenty-year note held for thirty means ten years with no mortgage payment at all. That changes the back end of a long hold dramatically, and any model that misses it understates the result.
• None of it is after tax — depreciation helps, recapture and capital gains hurt, and a 1031 exchange changes the question entirely. Every figure here is pre-tax.