rental-property

Rental Property Analysis

Overview

Calculate key rental property metrics: net operating income (NOI), cash-on-cash return, cap rate, and ROI per property. Tracks rental income against property-specific expenses for Schedule E tax preparation.

Wilson Tools Used

• transaction_search — find all income and expenses related to a specific property by vendor, description, or tag
• spending_summary — aggregate property expenses by category (mortgage, insurance, repairs, management fees)
• export_transactions — export property-specific transactions for tax filing (Schedule E)

Workflow

1. Ask for the property (address or name), purchase price, down payment, and current market value. If multiple properties, repeat for each.
2. Use transaction_search to find all rental income for the property (tenant payments, security deposits).
3. Use transaction_search to find all property expenses (mortgage, insurance, property tax, HOA, repairs, management fees, utilities paid by owner).
4. Use spending_summary to aggregate expenses by category for the property.
5. Calculate key metrics:

RENTAL PROPERTY ANALYSIS — [Property Name]
══════════════════════════════════════════════════════
Property: 123 Main St, Unit A
Purchase Price: $250,000   Down Payment: $50,000
Current Value: $275,000    Loan Balance: $192,000

ANNUAL INCOME & EXPENSES — [Year]
──────────────────────────────────────────────────────
Gross Rental Income                          $24,000
  Vacancy Loss (est. 5%)                    ($1,200)
Effective Gross Income                       $22,800

Operating Expenses
  Property Tax                              ($3,000)
  Insurance                                 ($1,200)
  Property Management (10%)                 ($2,400)
  Repairs & Maintenance                     ($1,800)
  HOA Fees                                  ($2,400)
  Total Operating Expenses                 ($10,800)

NET OPERATING INCOME (NOI)                   $12,000
  Mortgage Payment (P&I)                   ($11,520)

CASH FLOW (after debt service)                  $480

KEY METRICS
  Cap Rate          = NOI / Purchase Price  =  4.8%
  Cash-on-Cash ROI  = Cash Flow / Down Pmt  =  1.0%
  Total ROI         = (Cash Flow + Equity +
                       Appreciation) / Down  = 18.2%
  Expense Ratio     = OpEx / Gross Income   = 45.0%
  1% Rule Check     = Rent / Price          =  0.8%
══════════════════════════════════════════════════════

6. For total ROI, include:
   • Annual cash flow: $480
   • Equity buildup from mortgage principal paydown (check amortization schedule)
   • Appreciation: (Current Value - Purchase Price) / Years Owned, annualized
   • Total ROI = (Cash Flow + Annual Equity Gain + Annual Appreciation) / Total Cash Invested * 100
7. Use export_transactions for property-specific transactions to prepare Schedule E.

Without Wilson

1. Export bank transactions from the account used for the rental property.
2. In a spreadsheet, filter to only property-related transactions. Tag each with the property name if you own multiple.
3. Sum rental income (positive deposits from tenants).
4. Sum operating expenses by category. Common Schedule E categories: advertising, auto/travel, cleaning/maintenance, commissions, insurance, legal/professional, management fees, mortgage interest, repairs, supplies, taxes, utilities.
5. NOI = Gross Rent - Vacancy Allowance - Operating Expenses.
6. Cap Rate = =NOI/PurchasePrice*100.
7. Cash-on-Cash = =(NOI - AnnualMortgagePayments)/DownPayment*100.
8. For the mortgage principal paydown, check your loan amortization schedule (available from your lender's portal or use bankrate.com/calculators/mortgages/amortization-calculator).
9. For Schedule E filing: IRS Form Schedule E lines map to specific expense categories. Use TurboTax Rental Properties or FreeTaxUSA for guided entry. Depreciation is calculated as Purchase Price (minus land value) / 27.5 years for residential.

Important Notes

• Cap rate does not include mortgage payments — it measures the property's return independent of financing. Use it to compare properties.
• Cash-on-cash ROI includes financing and measures return on your actual cash invested. It can be negative if mortgage payments exceed NOI.
• The 1% rule (monthly rent should be >= 1% of purchase price) is a quick screening heuristic, not a hard rule. Many profitable properties do not meet it, especially in high-cost markets.
• Depreciation is a non-cash expense that reduces taxable income but not actual cash flow. Residential rental property depreciates over 27.5 years. This is a significant tax benefit not reflected in the cash flow numbers above.
• Track capital improvements separately from repairs. Repairs are expensed immediately; improvements (new roof, HVAC) are depreciated over their useful life.