property-investment-analysis

Property Investment Analysis Skill

A rental looks good until you run the real numbers — vacancy, maintenance, management, and debt service decide

whether it actually cash-flows. This skill structures the analysis with the metrics investors actually use

(NOI, cap rate, cash-on-cash, cash flow), shows the formulas and a worked example, and gives a verdict

against the investor's target — so a deal is judged on math, not optimism.

> Note: this is an analysis aid, not financial, investment, tax, or legal advice, and it does not

> guarantee returns. It computes from the figures and assumptions you provide; verify numbers and decisions with

> a qualified professional. Use real figures where given; never fabricate income/expenses — mark placeholders.

Working from a brief

Given a price and rent, run the analysis anyway — structure it with the standard metrics and a worked

example, using realistic placeholder assumptions for any missing operating cost (replace with your numbers)

(vacancy %, maintenance, management, taxes, insurance). Show the formulas. Never present invented figures as

real.

Required Inputs

Ask for these only if they aren't already provided (else use labelled placeholders):

• Purchase — price, closing costs, expected rehab, and the financing (down payment, rate, term) if leveraged.
• Income — monthly rent (and any other income), and a realistic vacancy assumption.
• Operating expenses — taxes, insurance, maintenance, management, HOA, utilities, capex reserve.
• Investor criteria — target cash-on-cash / cap rate / monthly cash flow, and the strategy (buy-and-hold, etc.).

Output Format

Investment Analysis: [property]

• How the numbers work — the formulas up front: NOI = annual income − operating expenses (excl. debt); Cap rate = NOI / price; Cash flow = NOI − debt service; Cash-on-cash = annual cash flow / cash invested.
• Income — gross rent, vacancy allowance, effective income.
• Operating expenses — itemised (taxes, insurance, maintenance, management, reserves…), with placeholders flagged.
• Returns — a clean summary with the worked numbers:

| Metric | Value |

|---|---|

| NOI (annual) | … |

| Cap rate | …% |

| Monthly cash flow | … |

| Cash invested | … |

| Cash-on-cash return | …% |

• Verdict — does it meet the investor's criteria? The strengths, the risks, and the assumptions it hinges on (rent, vacancy, capex).
• Sensitivity — how the verdict shifts if rent is lower or vacancy/expenses higher (a quick downside check).

Mark all placeholder figures (replace with your numbers).

Quality Checks

• [ ] Uses real metrics (NOI, cap rate, cash flow, cash-on-cash) with the formulas shown
• [ ] Operating expenses include the often-forgotten ones (vacancy, maintenance, management, capex reserves)
• [ ] Debt service is separated from operating expenses (NOI excludes it; cash flow includes it)
• [ ] Returns are computed from the inputs, not invented; placeholders are flagged
• [ ] The verdict is judged against the investor's stated criteria
• [ ] A downside/sensitivity check is included

Anti-Patterns

• [ ] Do not omit vacancy, maintenance, management, and capex — that's how a "good" deal becomes a money pit
• [ ] Do not fold debt service into operating expenses — it breaks NOI and cap rate
• [ ] Do not invent operating costs as fact — use the user's figures or labelled placeholders
• [ ] Do not present one optimistic scenario — show the downside sensitivity
• [ ] Do not give investment advice or guarantee returns — analyse and point to a professional

Based On

Real-estate investment analysis practice — NOI/cap-rate/cash-on-cash modelling, full operating-expense accounting, and downside sensitivity.