Investment Property
Worksheet.

Every successful real estate investor knows that the numbers tell the truth. A property can look great on the outside, but if the math doesn't work, it's not a good investment. This worksheet walks you through the exact analysis process Tim Tepes uses to evaluate every investment property across the Lehigh Valley.

Grab a calculator and work through each step. By the end, you'll know whether a property is worth pursuing — or walking away from.

Start with the asking price (or the price you negotiate). This is the foundation for every calculation that follows. In the Lehigh Valley, single-family investment properties typically range from $150,000 to $350,000, while small multifamily (2–4 units) range from $200,000 to $500,000.

Research comparable rentals in the immediate area. Look at similar properties — same bedroom count, same condition, same neighborhood. Don't guess. Use actual rental listings and recent lease data. Tim Tepes provides a fair market rent analysis for every property he recommends.

Multiply your monthly rent by 12. This is your gross annual income — the total rent you'd collect if the property were occupied every single month.

No property is occupied 100% of the time. Between tenant turnover, maintenance periods, and market fluctuations, you'll experience some vacancy. A safe assumption is 5–8% of gross annual income for well-located Lehigh Valley properties. Always budget for vacancy — it's not a matter of if, but when.

Subtract your vacancy allowance from gross annual income. This is what you'll actually collect — your effective gross income. This is the real number to work from, not the theoretical max.

Now subtract every cost of owning and operating the property. Here's the full breakdown:

Subtract total operating expenses from your effective gross income. The result is your Net Operating Income — the true income the property generates before mortgage payments. This is the number you use to calculate cap rate and evaluate the property's inherent profitability.

If you're financing the property (and most investors do — that's Leverage at work), calculate your annual mortgage payment. Include principal and interest. Property taxes and insurance are typically included in your monthly payment via escrow, but they're already counted in your operating expenses above.

This is the number every investor wants to know: how much money lands in your pocket each month? Subtract your annual mortgage payment from your NOI. Divide by 12 for monthly cash flow.

The capitalization rate tells you the property's yield if you paid all cash. It lets you compare different properties on an apples-to-apples basis. See our full Cap Rate guide for details.

This is the metric that matters most for financed purchases. It tells you what your actual invested cash earns each year. See our full Cash-on-Cash Return guide for details.

The 1% rule is a quick screening tool. It says: the monthly rent should be approximately 1% of the purchase price. If a $200,000 property rents for $2,000/month, it passes the 1% rule. If it only rents for $1,200/month, it likely won't generate positive cash flow.

Important: The 1% rule is a rough guide, not a hard rule. In appreciating markets like the Lehigh Valley, a property that "fails" the 1% rule may still be an excellent investment when you factor in appreciation, equity building, and tax advantages. Always do the full analysis.

Complete Example: Lehigh Valley Rental

Here's a real-world example using typical Lehigh Valley numbers:

This property just misses the 1% rule (0.9%), but with a 5.7% cap rate, 6.4% cash-on-cash return, plus tax benefits from depreciation and appreciation, it's a solid investment — especially in the Lehigh Valley's appreciating market.