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The math and the law appear beside every answer: the formula that produced it, the statute behind it, and what a lender or an appraiser would call it.
Part Three · The Property

Your house is not paying you
what you think it is.

Every owner knows what their property is worth. Almost none know what it earns — and the number that matters is not the return on what you paid, it is the return on what you have locked inside it today. That number falls every year you own the place. This guide computes it, and tells you the year it stops being worth it.

Everything stays in this browser tab. Rents, balances, and addresses are computed here and never stored, never sent to a server except the one lookup you press a button for. The live figures — the mortgage rate, the Treasury yield, the house price index — come from the same automated pipeline the Wealth Guide runs on, and every one of them is stamped with its date and its source. Nothing on this page states a rate or a limit from memory.
What the record is and is not. The value that comes back is an automated valuation model, a regression on recent comparable sales, not an appraisal and not an opinion of value under USPAP. It has a confidence band and the band is printed. The sale price and date come from the county's recorded transfer, which is the same document a title examiner reads. Basis is not price. Under IRC Section 1012 your basis starts at cost and is adjusted under Section 1016 for capital improvements up and depreciation down, so the number that matters at sale is almost never the number on the deed. And appreciation is not income. It is unrealized, it is untaxed until you sell, and until then it is the denominator of everything below.
One · The Record

Start with what the county already knows.

Before a single assumption gets made, the public record supplies three of the four numbers this guide runs on: what it is worth now, what it last sold for, and when. Type the address and let the records do the work.

Help me understand what I actually own, and what it has actually done.

The address goes to the records provider and nowhere else. It is not stored, not logged, and not attached to you.

This is my home This is a rental I am deciding whether to buy it
Type an address and press the button, or fill the boxes yourself. Everything below builds on these four numbers.

What the neighbors actually sold for. This is the row of properties an appraiser lines up before any of the work starts — the same street where possible, the same rough size, the characteristics the county has on file, and what each one is recorded as having sold for. Nothing on it is from a multiple listing service, and that is a decision rather than a limitation: the county record is public, statewide, free, and nobody can take it away.

Why this grid stops where it stops. An appraiser’s sales comparison approach has two halves. The first is selecting comparables and laying out their characteristics; the second is adjusting each one — for condition, for a renovated kitchen, for a corner lot, for a view, for the market having moved since the sale, for seller concessions that never appear in the recorded price. The adjustments are the craft, and they are why the work is licensed. This page does the first half and stops, visibly, at the line where the second half begins.

That line is also a legal one. Under N.C. Gen. Stat. Section 93A-83(f) a broker’s comparison “shall not under any circumstances be referred to as a valuation or appraisal,” and one that estimates value rather than price “shall be deemed to be an appraisal,” which only a licensed appraiser may prepare under Chapter 93E. So there is deliberately no conclusion of value here, no adjustment, and no average presented as an answer — a range and the rows behind it, which is what an honest half of the work looks like. Handing you an unadjusted grid dressed up as a finished one would not be neutral, it would be misleading, and that is its own problem under Section 93A-6(a)(1).
Net operating income is a defined term, and the definition is the whole fight. NOI is effective gross income less operating expenses, and it deliberately excludes four things: debt service, income taxes, depreciation, and capital expenditures. That is not an accounting nicety. It exists so a property can be valued independently of who buys it and how they finance it — the same building has one NOI and a thousand different cash flows. Which is exactly why a seller's pro forma is not evidence. The three line items a seller quietly leaves out are vacancy, management, and reserves, and leaving out all three can lift a stated NOI by a fifth. A fifth of NOI, divided by a nine percent cap rate, is roughly two years of your money. Vacancy and credit loss, management whether or not you hire it, and a reserve for the roof you will replace are underwriting requirements, not pessimism.

One distinction the definition above hides, and this worksheet takes a side on. A capital expenditure is the roof you actually put on in the year you put it on; a replacement reserve is the annual accrual toward it. NOI excludes the first and appraisal practice includes the second, which is why the reserve percentage below is deducted here and a lender computing debt coverage may well add it back. The deduction is deliberate: an eight unit building consumes roofs, water heaters and HVAC on a schedule, and a model that pretends otherwise is not measuring the same asset you own.
Two · The Income

What it collects, and what it keeps.

A rent roll is not a number, it is a list. Every unit, every fee, every month. Then the three expenses owners forget, and what is left is the only figure a lender or an appraiser will look at.

Help me understand what this property actually earns before the bank takes its share.

The rent roll. One line per unit — for a single family home that is one line. Base rent is the lease amount. A resident benefits package is the bundled monthly charge many managers add for filter delivery, renters insurance, credit reporting and the like; leave it at zero if you do not run one. Other is pet rent, parking, storage, laundry: recurring monthly money that is not base rent. If you pulled the address above, the market rent estimate is filled into row one as a starting point — overwrite it with your actual lease.

UnitBase rentBenefits pkgOther monthly

Now the money that never arrives, and the money that leaves. Vacancy and credit loss is the share of a year the unit sits empty or the rent does not get paid; a month of turnover a year is about eight percent. Management, maintenance and reserves are entered as percentages of collected rent because that is how they actually behave. Count management even if you self manage: your time is the fee, and the day you sell, the buyer pays it.

Add at least one rent and the operating statement builds itself.
Override, if you have the real statement. If you are holding a seller's actual profit and loss, or your own, type the net operating income here and every figure below this line uses yours instead of mine. Leave it blank and the rent roll drives everything.
The payment is a formula, not a quote. Level payment amortization solves for the single payment that retires the balance in exactly n periods: PMT = L × i / (1 − (1 + i)−n), where i is the monthly rate and n is the number of months. Twelve of those over the loan amount is the mortgage constant, or annual loan factor, and it is the number Stage Four runs on. Debt service coverage is net operating income over annual debt service; below 1.00 the property does not pay for itself, and most portfolio lenders on small multifamily will not write below about 1.20 — that spread is their margin for the year you have a vacancy and a furnace at once. Note what the payment does not include here: taxes and insurance were already taken out in Stage Two as operating expenses, so counting them again in the payment would double charge you. This is the single most common error in a homemade spreadsheet. Two more things the payment does not include. Mortgage insurance, which a conventional borrower under twenty percent equity pays until the loan reaches the cancellation point and an FHA borrower who put less than ten percent down pays for the life of the loan; it belongs in your cash flow and it is not in this box. And an escrow shortage, which is not a new cost but a timing one, and which is why the payment your servicer takes almost never matches the payment a calculator produces.
Three · The Debt

What the bank’s money costs.

Leverage is the reason real estate returns what it does, and the reason it can take the house down. Both live in the same two numbers: the payment, and how much of the income it eats.

Help me understand the loan, honestly, including the part that is not really mine yet.

The rate box starts at this week’s national average from the Freddie Mac survey, stamped below with the week it was published. If you already have a mortgage, type your own rate and the balance you owe today — that is what makes Stage Five real rather than hypothetical. And if you do not know either number, do not guess: the county knows the day your deed was recorded, and the block below knows what a mortgage cost that week.

Reconstruct the loan instead of guessing at it. Four rungs, best first, and it tells you which one it stood on.
One. The mortgage itself. Your loan is recorded as a deed of trust in the same register as your deed, usually within a page or two of it, and its face amount is the original balance to the dollar. That is the true answer and no county in North Carolina publishes it in a form a page can read. Where the record gives us the deed book and page, Stage One prints it, and one search at the register of deeds turns this whole block into a fact.
Two. What you tell us. The balance you type wins over everything below it. Failing that, your actual principal and interest payment pins the original loan exactly — payment and rate determine the loan, so that rung needs no assumption about your down payment at all.
Three. The recorded price and the market of that week. The Freddie Mac survey has published the rate every week since April 1971. Where the county publishes the excise stamp on your deed, the purchase price is not an estimate either: North Carolina charges a dollar per five hundred of consideration, so the stamp is the price. Only the down payment is then an assumption.
3.5% · FHA5%10% 20% · no PMI25% · investorPaid cash
I refinanced after I bought it
Add the balance you still owe and the payment, the coverage ratio and the cash flow all compute here.
Band of investment, also called the mortgage equity technique. A capitalization rate is not a market opinion here; it is built from the two parties who have to be paid. The lender needs its mortgage constant on its share of the money, the equity investor needs its cash on cash return on the rest, and the weighted sum of those two demands is the rate the property has to earn: R = (LF × M) + (YE × E), with M the loan to value share and E the equity share. Divide net operating income by that rate and you have value by the income approach — what the building is worth to somebody who has to finance it and wants a return, which is a different question from what a buyer might pay. Appraisal recognizes three approaches, sales comparison, cost, and income, and reconciles them; income is the one that governs anything bought to produce money. The uncomfortable part is that the rate moves with the debt market, so the same building is worth less on the week rates rise, having changed in no way at all.

And the rate has to be the market’s, not yours. The band of investment asks what the property must earn to satisfy a lender and an investor who are financing it today. An owner carrying a legacy loan at three percent who feeds that rate in here gets a cap rate that no buyer could obtain and a value nobody could pay: at a seventy five percent loan, dropping the rate from seven to three lifts the implied value by roughly half. Your legacy rate is a real asset, but it is an asset attached to you, not to the building, and it does not transfer with the deed.
Where the numbers came from. The loan factor is not typed in here. It is computed from the rate and term in Stage Three, which is the correction to the way this is usually done in a spreadsheet: a hardcoded constant like 0.0922696 is right for one rate on one day and silently wrong forever after. Cash on cash is the equity investor’s demanded first year return on the money actually put in, not the total return — appreciation and paydown are deliberately excluded, because a cap rate is a snapshot of a single year and pretending otherwise is how people talk themselves into overpaying.
Four · The Value

What it is worth to somebody who needs a return.

An asking price is a wish. This is the arithmetic that turns income into value, built from what a lender requires and what an investor demands — and it is the same worksheet that told me a building listed at seven hundred sixty thousand was worth six hundred and six.

Help me understand what this property is worth as an investment, not as a listing.

Read the rate box carefully, because it is not your rate. A capitalization rate is built from what the next buyer would have to pay, not from the loan you happen to be carrying. If you locked three percent in 2021 and this worksheet used it, it would tell you the building is worth roughly half again what anyone could actually pay for it. So this box starts at today’s market rate and stays independent of Stage Three.

Fill in the income above and the value builds here.
Return on equity, and why it has to fall. The numerator is the three ways a property pays: cash flow after debt service, principal reduction (the part of each payment that is savings wearing a bill’s clothing), and appreciation. The denominator is your equity at the start of the year — value less what you owe, and if you check the box, less what it would cost to get the money out. Return on cost is a museum piece: it measures a decision you already made and can never make differently. Return on equity measures the decision you are making again every morning you do not sell.

It falls for a structural reason, not a market one. Appreciation grows with value; equity grows with value plus every dollar of principal you retire, so the denominator outruns the numerator by construction. Leverage is the whole engine: the same five percent appreciation on a house is a fifty percent return on a ten percent down payment and a five percent return once the mortgage is gone. Paying a rental off does not increase your return. It converts a levered asset into an unlevered one and quietly cuts your return by most of what leverage was giving you.

Two honest qualifications on the numerator. Principal reduction is counted as return because it is money that has genuinely moved from the lender’s column to yours, but it is not spendable and it is not optional the way a market return is; a reader comparing this to a liquid alternative should know that some of what they are looking at is forced saving. And when equity is measured net of selling costs, the appreciation in the numerator is netted the same way, because a dollar of paper gain you would have to pay a commission to collect is not a whole dollar.
What the crossing line means, and what it does not. Both comparison lines are computed, not remembered. The risk free line is the ten year Treasury live from the U.S. par yield curve. The alternative line starts at the long run compound price return of the S&P 500, measured from the index itself over its whole available history — a price return, because dividends are not in an index level, which means a total return investor did better and this line is a floor rather than a forecast. Raise it if you would actually reinvest dividends; the box is yours and the assumption is then yours too.

The honest caveats, in order. Selling is not free, so the comparison only becomes real if you check the net of costs box. A mortgage below the current market rate is itself an asset — giving up a three percent loan to chase a higher return elsewhere is a trade with a hidden price on the other side. Property is illiquid, undiversified and concentrated in one street; a Treasury is none of those. Appreciation here is a constant, and no actual housing market has ever moved in a straight line. And unless you check the shelter box these lines are stripped of tax on both sides: Stage Six is where the tax on the way out arrives, and it changes the answer more than anything on this chart.
Five · The Decay

The number nobody computes.

Ask an owner how their rental is doing and they will tell you what they paid and what it is worth. Ask what it returns on the equity trapped inside it this year, and the room goes quiet. It is usually the highest number the day you buy and the lowest number the day you finish paying it off, which is the exact opposite of what everyone believes.

Help me understand what my equity is earning right now, and when it stops being worth it.

Appreciation starts at the long run national rate from the federal house price index, which is a repeat sales index — it compares houses to themselves rather than to whatever else sold that quarter. If the record found your purchase price and year, the rate this property has actually done is offered next to it. Rent growth drives the income side; historically it tracks somewhere near inflation, and a rate above three or four percent is a forecast, not an assumption.

And a national index is not your street. For Cumberland County the record is already drawn to the block: the Cumberland County market map shows what every neighbourhood has actually done from 2022 to 2025, computed from recorded sales. If the property sits there, the appreciation you type above should come from your own square of the map, not from a national average that has never seen Fayetteville.

Expenses get their own box because they do not move with the rents. Insurance and property tax on small residential have been outrunning rent growth for years, and a model that grows both at the same rate quietly manufactures cash flow that never shows up. Set them equal if you disagree; the point is that it is now a choice you made rather than one the page made for you.

Measure equity net of selling costs Use this property’s actual appreciation Count the depreciation tax shelter
Finish the record, the income and the debt above and the whole curve appears here.
Four doors, and the tax code behind each one. Refinance is borrowing, and borrowed money is not income — there is no tax event at all, which is why a cash out refinance is the only door that moves money without a return. Section 1031 defers gain on an exchange of real property held for productive use or investment for like kind property, on a schedule with no mercy in it: forty five days to identify, one hundred eighty days to close, a qualified intermediary holding the money the entire time because touching it ends the exchange. Personal residences do not qualify. Selling triggers gain under Section 1001, and gain on a rental arrives in two flavors: unrecaptured Section 1250 gain, the part attributable to depreciation you took, taxed at a maximum rate of twenty five percent under Section 1(h)(1)(D), and the rest at long term capital gain rates under Section 1(h), plus the net investment income tax of three point eight percent under Section 1411 if you are above the threshold. Depreciation is not optional: the basis is reduced by the amount allowed or allowable, so an owner who never claimed it still owes the recapture. Dying is the door nobody puts on a spreadsheet, and under Section 1014 the basis of property in a decedent’s estate becomes its fair market value at death — the entire gain, and the entire depreciation recapture, evaporates. That is the sentence that connects this page to the Estate Guide.

Three things the four boxes below cannot know about you. A 1031 defers the whole gain only if you reinvest all of the equity and replace the debt you were carrying; take cash out, or trade into a smaller loan, and the difference is boot and it is taxable now. Passive losses you were not allowed to deduct while you held it are generally released in the year of a fully taxable disposition, which can turn a frightening tax figure into a much smaller one and is the single most common thing missing from a homemade exit calculation. And the land share below is an allocation, not a fact: where the county publishes its own assessed split it is read from the record and shown, because a third party’s allocation on the public record is worth more under examination than the taxpayer’s round number.
The figure law applies hardest right here. The rates above are written into the Code and do not move with the calendar: twenty five percent, three point eight percent, the zero, fifteen and twenty percent brackets. The income thresholds that decide which of those applies to you are indexed every single year, and this page therefore does not state one. It asks which bracket you are in rather than guessing from a number it half remembers, because a threshold typed into a web page is a threshold that is wrong the following January. The North Carolina rate is likewise on a statutory schedule that steps down over several years under N.C. Gen. Stat. Section 105-153.7, so it is a box you fill, not a number I supply. Check the current year with the Department of Revenue or your preparer and type it in.
Six · The Exit

Four doors out, and what each one costs.

Once the curve says your equity has stopped earning, there are only four things you can do about it, and three of them have a tax bill attached. This is the comparison, side by side, on your actual numbers.

Help me understand what it would cost me to get my money back out.

Depreciation first, because it drives the bill. Residential rental property is written off straight line over 27.5 years under IRC Section 168(c); commercial over 39. Land is never depreciated, so only the building share counts. If you have owned it as a rental, the years below are the years it was in service — and remember, allowed or allowable: not claiming it does not avoid the recapture.

Residential · 27.5 years Commercial · 39 years

Which long term capital gain rate applies to you? Not a dollar threshold — those are indexed annually and this page will not state one. Pick the bracket your preparer puts you in.

0 percent15 percent20 percent Add the 3.8 percent net investment income tax
Fill in the record and the debt above and the four doors compute here.
Your home is a different animal. If this is where you live, Section 121 excludes a large slice of gain on a principal residence owned and used as such for two of the last five years, and it is one of the last genuinely generous provisions left in the Code. The exclusion amount is indexed language I will not quote here for the same reason as everything else; it is a figure to confirm, not to remember. What is worth knowing without looking anything up: a home has no depreciation recapture unless you took a home office or rented part of it, and there is no Section 1031 on a personal residence at all.
The seventy percent rule and what it is actually protecting. The maximum allowable offer is after repair value times a discount, less the rehab: MAO = ARV × d − rehab. The classic d is seventy percent for a full flip and it is not a profit margin — it is the space that has to absorb agent commissions on both sides, buy and sell closing costs, points, carrying interest, insurance and utilities while it is empty, holding taxes, and being wrong about the rehab. Eighty percent is a wholetail number, for a property that needs cosmetics rather than construction and sells close to as is.

Read the grid down, not across. Down is the market moving against you; across is time moving against you. The column that matters is the one where both go wrong at once, because that is the deal you will actually get. A flip that only works at the top left corner is not a deal, it is a bet on a forecast — and note that a profit column shrinking as months pass is a hard money loan doing exactly what it was designed to do. This is not a rental calculation and it is not taxed like one: property held primarily for sale to customers is dealer property, the gain is ordinary income subject to self employment tax, and it does not qualify for Section 1031.
Seven · The Other Trade

If you are not keeping it.

Everything above assumes you hold the property and let time do the work. Buying to fix and sell is a different trade with different arithmetic, and the reason most people lose money on it is that they underwrite one outcome instead of the grid of outcomes they will actually face.

Help me understand whether this is a deal or a lesson.

Rehab can be entered as a dollar figure or estimated from square footage. The three rough bands I was taught: light cosmetic work around twenty dollars a foot, a medium rehab around thirty five, a heavy one with systems and layout around fifty. They are starting points for an offer, never a substitute for a contractor walking it.

Light · $20/sfMedium · $35/sfHeavy · $50/sf

An empty house still costs money every month, and a homemade sheet almost never carries it. Rehab money is normally drawn in stages rather than handed over at closing, so charging interest on the whole budget from day one overstates the carry; the second box lets you model it either way.

Add an after repair value, a purchase price and a rehab budget and the whole grid runs.
Cash on cash is the only return that answers the question you actually asked. Cap rate values the building and ignores you. Return on equity measures what is trapped inside it. Cash on cash measures the one thing you can feel: money out of pocket at closing against money in your pocket that year. The denominator is everything you actually spent — down payment plus closing costs plus what it took to make it rentable — and the numerator is the cash flow after every expense and the whole mortgage payment. It says nothing about appreciation, nothing about principal paydown, and nothing about tax, which is the point: it is the number that tells you whether the thing feeds you or you feed it.

Break-even occupancy is its shadow and nobody computes it. It is the share of the year the property has to be rented just to cover its own costs, and the gap between that and full occupancy is your entire margin for a bad tenant, a slow winter, and a furnace. Above about eighty five percent, the deal has no room in it.
Entitlement is not a credit score and not a coupon. A VA guaranty is the Department’s promise to the lender to cover a quarter of the loan, and the arithmetic follows from that: the county loan limit times twenty five percent is the maximum guaranty, less whatever is tied up in a loan you already have, and four times what remains is what you can borrow with nothing down. Above that, the down payment is not a percentage of the price — it is the shortfall between a quarter of the price and the guaranty you have left, which is a much smaller number than most veterans assume and the reason the second house is more possible than it sounds. Entitlement is restored when the loan is paid off or when a qualified buyer assumes it, and one restoration can be used without selling. This is the arithmetic; the Certificate of Eligibility is the fact, and the funding fee, the residual income test and the occupancy requirement are three more things a lender will apply that this box does not.
Eight · The Deal

Does it feed you, or do you feed it?

Everything above is about a property you already own. This is the screen for the one you are looking at — the same numbers you have already typed, turned into the three figures that decide whether to keep reading: what it returns on the cash you put in, how empty it can afford to be, and, if you served, what it would take out of pocket.

Help me understand whether this is worth the cash it would take.

The rent, taxes, insurance and operating percentages come from Stage Two, and the rate and term from Stage Three. Only the three things a purchase adds are asked for here.

Add a purchase price and the rents in Stage Two, and the deal screen runs.
If you served, the arithmetic is different. Entitlement is the part almost nobody computes correctly, including lenders in a hurry. Your county limit is read live from the federal figure; what you have already used is on your Certificate of Eligibility, and zero is the right answer if this is your first.
Educational illustration only. Not a loan estimate, not a pre-approval, and not a substitute for a lender running your actual file.

Equity is not a score.
It is money with a job to do.

Every dollar sitting inside a property is a dollar you have chosen not to put somewhere else, and that choice gets made again every year whether or not anyone runs the numbers. Most people run them once, at closing, and never again.

If the curve on this page crossed, the next conversation is about which door — and that conversation belongs with a licensed attorney and a CPA in your state before it belongs with anyone else.

Start the conversation