The Top Metrics Real Estate Investors Should Track for Every Deal

Success in real estate investing isn’t just about intuition—it’s about numbers. To consistently make profitable decisions, you need to track specific metrics that reveal the true potential of a deal. These metrics not only guide your investment decisions but also give private lenders confidence in your ability to execute.

How to Create a Winning Real Estate Investment Proposal for Private Lenders

In this guide, we’ll explore the top metrics every real estate investor should track, how to calculate them, and why they matter for securing private financing and achieving success.

1. After-Repair Value (ARV)

What Is It?

The After-Repair Value (ARV) is the estimated value of a property after renovations are complete. It’s a critical metric for fix-and-flip projects and refinancing decisions.

How to Calculate It:

ARV is based on comparable properties (comps) in the same area that have recently sold.

Formula:
ARV = Average Sale Price of Comps

Example:

• 125 Main Street (3 beds, 2 baths): Sold for $350,000

• 130 Main Street (3 beds, 2 baths): Sold for $340,000

• 128 Main Street (3 beds, 2 baths): Sold for $360,000

ARV = ($350,000 + $340,000 + $360,000) ÷ 3 = $350,000

Why It Matters:

ARV helps you determine if a deal is worth pursuing and how much you can afford to spend on the purchase and renovations. Lenders rely heavily on this metric to assess loan viability.

2. Return on Investment (ROI)

What Is It?

ROI measures the profitability of a deal, showing the percentage return relative to your investment.

How to Calculate It:

ROI = (Net Profit ÷ Total Investment) × 100

Example:

• Purchase Price: $200,000

• Renovation Costs: $50,000

• Holding Costs: $10,000

• Sale Price: $300,000

• Net Profit = $300,000 - ($200,000 + $50,000 + $10,000) = $40,000

• ROI = ($40,000 ÷ $260,000) × 100 = 15%

Why It Matters:

A higher ROI means a more profitable deal. For fix-and-flip projects, an ROI of 10-20% is generally considered good, while rental properties typically yield lower but steadier returns.

3. Loan-to-Value Ratio (LTV)

What Is It?

LTV is the ratio of a loan amount to the property’s appraised value.

Formula:

LTV = (Loan Amount ÷ Property Value) × 100

Example:

• Loan Amount: $150,000

• Property Value: $200,000

• LTV = ($150,000 ÷ $200,000) × 100 = 75%

Why It Matters:

Most private lenders prefer an LTV of 65-75% to reduce their risk. A lower LTV improves your chances of securing financing and shows lenders you have equity in the deal.

4. Cash Flow (for Rentals)

What Is It?

Cash flow is the net income generated by a rental property after all expenses are paid.

Formula:

Cash Flow = Gross Rental Income - Operating Expenses

Example:

• Monthly Rental Income: $2,000

• Operating Expenses: $1,200 (property management, maintenance, taxes, etc.)

• Cash Flow = $2,000 - $1,200 = $800/month

Why It Matters:

Positive cash flow ensures your rental property generates income while covering expenses. It’s a key metric for long-term sustainability and attracting financing for future deals

5. Cap Rate (Capitalization Rate)

What Is It?

Cap rate measures the return on a property relative to its price, excluding financing. It’s primarily used to compare rental properties.

Formula:

Cap Rate = (Net Operating Income ÷ Property Price) × 100

Example:

• Net Operating Income (NOI): $24,000/year

• Property Price: $300,000

• Cap Rate = ($24,000 ÷ $300,000) × 100 = 8%

Why It Matters:

Cap rate helps you evaluate whether a rental property is a good investment compared to others in the market. A cap rate between 5-10% is considered average, depending on the market and property type.

6. Cash-on-Cash Return (CoC)

What Is It?

Cash-on-Cash Return measures the return on the actual cash you’ve invested in a property.

Formula:

CoC = (Annual Cash Flow ÷ Total Cash Invested) × 100

Example:

• Annual Cash Flow: $9,600

• Total Cash Invested: $60,000 (down payment, closing costs, renovations)

• CoC = ($9,600 ÷ $60,000) × 100 = 16%

Why It Matters:

Unlike ROI, CoC focuses solely on your cash investment, making it ideal for evaluating leveraged deals.

7. Break-Even Ratio (BER)

What Is It?

BER shows the percentage of a property’s income needed to cover operating expenses and debt payments.

Formula:

BER = [(Operating Expenses + Debt Service) ÷ Gross Rental Income] × 100

Example:

• Operating Expenses: $18,000/year

• Debt Service: $12,000/year

• Gross Rental Income: $36,000/year

• BER = [($18,000 + $12,000) ÷ $36,000] × 100 = 83%

Why It Matters:

A lower BER means the property is less risky. Lenders prefer deals where the BER is below 85%.

How These Metrics Help Secure Private Financing

Lenders want to see numbers that paint a clear picture of the deal’s profitability and risk. By presenting metrics like ARV, ROI, and LTV in your proposal, you:

• Build Credibility: Show you’ve thoroughly analyzed the deal.

• Reduce Risk: Prove the project is financially viable.

• Improve Loan Terms: Strong metrics can lead to better interest rates and higher LTV ratios.

Conclusion

Tracking the right metrics is the key to successful real estate investing. Metrics like ARV, ROI, and cash flow not only guide your decisions but also make your proposals more attractive to private lenders.

At My Verified Investor, we connect well-prepared investors with trusted private lenders. Ready to fund your next deal? Sign up today and turn your metrics into opportunities.