Companion to: Real Estate Decoded Chapter 5 (SFR Build) - Workbook tab 08_SFR_BTR
Inputs
Outputs
Gross potential rent (annual)
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Effective gross income (EGI)
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Operating expenses
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Net Operating Income (NOI)
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Maximum offer price (at target cap)
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How to read this tool: The buy-box is the documented criteria — property type, market, rent range, target cap. Without it, you chase deals. With it, you filter deal flow and pass on the wrong ones quickly. Adjust the expense ratio for your specific market: SFR runs 35-42% in stable Sun Belt markets, 45-55% in older Northeast/Midwest stock with deferred maintenance.
What this tool is for
The single-family-rental cottage operator who buys correctly, manages tightly, and refinances patiently outperforms most institutional allocations across a full cycle. This tool gives you the maximum offer price discipline that anchors the buy-box.
Benchmarks the practitioner watches
- Sun Belt SFR cap rates 5.5-6.5% institutional / 6.5-8% cottage operator
- Operating expense ratio 35-42% in stable markets, 45-55% in older stock
- Vacancy allowance 5% baseline, 8-10% in transitional neighborhoods
- Property management fee 8-10% of EGI if outsourced
Common mistakes
- Underestimating operating expenses because you only count the cash items (missed: turn cost, lease-up cost, capital reserve)
- Using nominal rent instead of EGI (after vacancy) in the cap calculation
- Buying for appreciation when the going-in cap doesn't pencil — appreciation is a bonus, not a thesis
- Skipping the buy-box and chasing one-off deals — the discipline IS the alpha
Educational reference only. Not investment, tax, legal, or real-estate advice. Confirm market-specific cap rates, lender terms, and tax overlay with your own advisors before acting.