Real Estate Investing Made Simple

What it means

A quick test that asks: will the monthly rent be at least 1% of what you paid for the property, including repairs?

Formula

Monthly rent ÷ (purchase price + repairs) ≥ 1%

Example (hypothetical)

Buy for $180,000 and spend $20,000 on repairs. Your all-in cost is $200,000, so the 1% Rule wants rent of at least $2,000 a month.

When it is useful

Sorting through lots of listings fast, especially single-family homes and small multifamily.

When it can mislead you

Higher-priced areas like many lake and Greenville neighborhoods almost never meet it, even when they make good long-term rentals. It ignores taxes, insurance, HOA dues and your loan.

Common mistake

Treating a pass as proof of a good deal, or forgetting to add repair costs to the price.

Try it in the calculator

What it means

A tougher version of the 1% Rule: monthly rent should be at least 2% of your all-in cost.

Formula

Monthly rent ÷ (purchase price + repairs) ≥ 2%

Example (hypothetical)

A $100,000 all-in property would need $2,000 a month in rent to pass.

When it is useful

Spotting unusually high-rent properties.

When it can mislead you

Properties that pass are often older, in rougher condition or in areas with higher vacancy and repair costs. A 2% property can lose money if it sits empty or needs a new roof.

Common mistake

Chasing 2% deals without budgeting for higher repairs, turnover and management.

Try it in the calculator

What it means

A shortcut that guesses about half of the rent will go to operating expenses, not counting your mortgage.

Formula

Operating expenses ≈ 50% of gross rent. NOI ≈ rent × 50%

Example (hypothetical)

Rent is $2,000 a month. Expect about $1,000 for taxes, insurance, repairs, vacancy, management and reserves. That leaves about $1,000 before the mortgage.

When it is useful

A first look before you have real expense numbers.

When it can mislead you

Newer homes, HOA communities and properties where tenants pay utilities can run well above or below 50%. Use real numbers before you buy.

Common mistake

Counting the mortgage as part of the 50%. The mortgage comes out of the other half.

Try it in the calculator

What it means

A flipping rule for the most you should pay for a house you plan to fix and sell.

Formula

Maximum offer = (after-repair value × 70%) − repair costs

Example (hypothetical)

A house will be worth $300,000 after repairs, and repairs cost $40,000. 70% of $300,000 is $210,000. Subtract $40,000, so the most you should offer is $170,000.

When it is useful

Making fast offers and leaving room for holding costs, selling costs and profit.

When it can mislead you

In fast-rising or very expensive markets, 70% can be too strict. On cheap houses it can be too loose, because fixed costs eat a bigger share.

Common mistake

Using a too-high after-repair value or a too-low repair budget.

Try it in the calculator

What it means

A looser version of the 70% Rule some flippers use in competitive markets. It is also close to the share of value some lenders will lend against.

Formula

Maximum offer = (after-repair value × 75%) − repair costs

Example (hypothetical)

Same $300,000 house with $40,000 of repairs: 75% of $300,000 is $225,000, minus $40,000 gives a $185,000 maximum offer.

When it is useful

Competitive markets, lower-risk cosmetic flips and experienced flippers with tight cost control.

When it can mislead you

Less room for mistakes. One surprise, like foundation or septic work, can wipe out the profit.

Common mistake

Using 75% on a heavy rehab where 70% or less is safer.

Try it in the calculator

What it means

Another way to say the 1% Rule: the price should be no more than 100 times the monthly rent.

Formula

Maximum price ≈ monthly rent × 100

Example (hypothetical)

A home rents for $1,800 a month. 100 × $1,800 = $180,000, so the rule says pay no more than about $180,000 all-in.

When it is useful

A fast gut check when you know the rent and want a target price.

When it can mislead you

Same weaknesses as the 1% Rule: it ignores expenses, financing and appreciation.

Common mistake

Forgetting repairs and closing costs when comparing to the price.

Try it in the calculator

What it means

How much yearly cash flow you get back for each dollar of your own cash in the deal.

Formula

Cash-on-cash = annual pre-tax cash flow ÷ total cash invested

Example (hypothetical)

You put in $60,000 (down payment, closing costs and repairs) and the rental makes $3,600 a year after all bills and the mortgage. $3,600 ÷ $60,000 = 6%.

When it is useful

Comparing deals that use loans, and comparing rentals to other places you could put your cash.

When it can mislead you

It leaves out loan paydown, appreciation and tax benefits, and it only looks at one year.

Common mistake

Leaving closing costs or repairs out of "cash invested", which makes the return look bigger.

Try it in the calculator

What it means

The yearly return a property would make if you bought it with all cash.

Formula

Cap rate = net operating income (NOI) ÷ purchase price

Example (hypothetical)

A property makes $15,000 a year after operating expenses (no mortgage) and costs $250,000. $15,000 ÷ $250,000 = 6%.

When it is useful

Comparing similar income properties and estimating value.

When it can mislead you

It ignores your financing and future changes in rent or value. Cap rates differ a lot by property type and location.

Common mistake

Subtracting the mortgage when figuring NOI. NOI never includes loan payments.

Try it in the calculator

What it means

Shows whether the property makes enough income to pay its loan. Many investment lenders use it to decide whether to lend.

Formula

DSCR = net operating income ÷ annual debt service (loan payments)

Example (hypothetical)

NOI is $18,000 a year and loan payments total $15,000. $18,000 ÷ $15,000 = 1.20, so income covers the loan 1.2 times.

When it is useful

Qualifying for DSCR loans and checking how safe your cash flow is.

When it can mislead you

Each lender figures it differently. Some use gross rent, and minimums commonly fall around 1.0 to 1.25. Ask your lender.

Common mistake

Using hoped-for rent instead of market rent a lender will accept.

Try it in the calculator

What it means

The total profit compared with what you put in.

Formula

ROI = total gain ÷ total cash invested

Example (hypothetical)

A flip makes $30,000 profit after all costs, and you invested $100,000 of your cash. $30,000 ÷ $100,000 = 30%.

When it is useful

Comparing flips and finished projects.

When it can mislead you

ROI does not show how long it took. 30% in six months is very different from 30% over five years. Use IRR for that.

Common mistake

Leaving out holding costs, selling costs or your own time.

Try it in the calculator

What it means

How hard your equity, the part of the property you own free and clear, is working for you.

Formula

ROE = annual return ÷ current equity

Example (hypothetical)

A rental you own has $200,000 of equity and makes $6,000 a year of cash flow. $6,000 ÷ $200,000 = 3%.

When it is useful

Deciding whether to keep, refinance or sell and trade up (see Portfolio Equity Recycling).

When it can mislead you

A low ROE is not automatically bad. A paid-off property is safer. Moving equity has costs, taxes and risk.

Common mistake

Ignoring selling costs and taxes when deciding to move equity.

Try it in the calculator

What it means

How big the loan is compared with the property value.

Formula

LTV = loan amount ÷ property value

Example (hypothetical)

A $240,000 loan on a $300,000 property is 80% LTV.

When it is useful

Knowing how much a lender will lend on a purchase or refinance. It is key to BRRRR.

When it can mislead you

Lenders use their own appraised value, which may come in lower than you expect.

Common mistake

Planning a refinance on a value you hope for instead of real comparable sales.

Try it in the calculator

What it means

A quick way to compare price to rent across similar properties.

Formula

GRM = purchase price ÷ gross annual rent

Example (hypothetical)

A $240,000 property rents for $2,000 a month ($24,000 a year). $240,000 ÷ $24,000 = a GRM of 10. Lower usually means more rent for the price.

When it is useful

Comparing similar properties in the same neighborhood.

When it can mislead you

It ignores expenses, so two buildings with the same GRM can have very different profits.

Common mistake

Comparing GRMs across different property types or areas.

Try it in the calculator

What it means

The share of time your units must be rented to cover all expenses and the loan.

Formula

Break-even = (operating expenses + debt service) ÷ gross potential rent

Example (hypothetical)

Expenses are $12,000 a year, loan payments $14,400, and full-year rent would be $30,000. ($12,000 + $14,400) ÷ $30,000 = 88%.

When it is useful

Judging risk. The lower the break-even, the more vacancy you can survive.

When it can mislead you

It assumes expenses stay steady, and they rarely do.

Common mistake

Forgetting big repairs (capital expenses) in the expense line.

Try it in the calculator

What it means

A yearly return that counts both how much money you make and when you get it.

Formula

IRR = the yearly rate that makes the present value of all cash in and out equal zero

Example (hypothetical)

You invest $50,000, collect $3,000 a year for 5 years, then sell and net $75,000 in year 5. That works out to an IRR of about 13.6%.

When it is useful

Comparing deals with different timelines, like a 6-month flip and a 10-year rental.

When it can mislead you

It is only as good as your guesses about future rent and sale price.

Common mistake

Treating an IRR projection as a promise.

Try it in the calculator

How it works

The IRS lets you deduct the cost of a rental building (not the land) over time, even while the property may be rising in value. Residential rentals are depreciated over 27.5 years and commercial buildings over 39 years.

The math

Building value ÷ 27.5 years = yearly deduction (residential)

Example (hypothetical)

A rental bought for $300,000 with $60,000 of land value has a $240,000 building. $240,000 ÷ 27.5 = about $8,727 a year of depreciation, which can offset rental income.

Who it fits

Every rental owner. It is the starting point for every strategy below.

Watch out for

When you sell, depreciation you took (or could have taken) is "recaptured" and taxed, generally at up to 25% at the federal level.

How it works

An engineering-based study that breaks a building into parts with shorter tax lives. Items like carpet, cabinets, appliances, some electrical and plumbing for equipment, and land improvements like driveways, fencing and landscaping can qualify for 5-, 7- or 15-year depreciation instead of 27.5 or 39 years. That front-loads your deductions into the early years.

The math

Accelerated deductions = value moved into 5-, 7- and 15-year property (often eligible for bonus depreciation) + regular depreciation on the rest

Example (hypothetical)

Hypothetical: a $700,000 short-term rental with $100,000 of land. Without a study, the $600,000 building gives about $21,800 a year. If a study moves $150,000 into shorter-life property, and that property qualifies for 100% bonus depreciation, the first-year deduction could be about $150,000 plus regular depreciation on the remaining $450,000 (about $16,400). Results vary by property and study.

Who it fits

Higher-value rentals, short-term rentals, multifamily and commercial buildings, newly built or recently bought property, and owners with income these deductions can actually offset. Studies can also be done on property bought in past years through a "look-back" (an accounting method change with your CPA).

Watch out for

Big deductions only help if you can use them. Under the passive activity rules, rental losses often can only offset passive income unless you qualify for an exception (see below). Faster depreciation also means more recapture when you sell. A study has a cost, so smaller properties may not justify one. Use a reputable engineering-based provider and coordinate with your CPA.

How it works

Lets you deduct a large share of qualifying shorter-life property (5-, 7- and 15-year items, often identified by a cost segregation study) in the first year. Federal law signed July 4, 2025 (the One Big Beautiful Bill Act) restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025.

The math

First-year deduction = qualifying short-life property × bonus rate

Example (hypothetical)

Hypothetical: $150,000 of qualifying property × 100% = a $150,000 first-year deduction.

Who it fits

Pairs with cost segregation on newly acquired property.

Watch out for

The building itself (27.5- or 39-year property) is not eligible. Timing and acquisition dates matter, so confirm eligibility with your CPA. South Carolina may treat bonus depreciation differently on your state return.

How it works

Under IRS rules, a rental where the average guest stay is 7 days or less generally is not treated as a "rental activity" for the passive loss rules. If you also materially participate (for example, more than 100 hours and more than anyone else, or other IRS tests), losses, often created with cost segregation, may offset your other income like W-2 wages.

The math

Average stay ≤ 7 days + material participation = losses may be non-passive

Example (hypothetical)

Hypothetical: a lake-area vacation rental with a cost segregation study creates a large first-year paper loss that a qualifying owner may use against other income.

Who it fits

High-income owners willing to actively run a short-term rental near Lake Keowee, Lake Hartwell or Clemson.

Watch out for

Strict, documented hour logs are essential. Using a full-service manager can make material participation hard to prove. HOA and local rules must allow short-term rentals. This is an area of IRS focus. Work closely with a CPA.

Try the short-term rental calculator

How it works

If you (or your spouse, filing jointly) qualify as a real estate professional, more than 750 hours a year and more than half of your working time in real property businesses, and you materially participate in your rentals, rental losses can be non-passive and may offset other income.

The math

750+ hours + more than 50% of working time in real estate + material participation

Example (hypothetical)

Hypothetical: a spouse who works full time in real estate qualifies, so cost segregation losses on the couple's rentals may offset the other spouse's salary.

Who it fits

Full-time agents, brokers, builders, property managers and investors.

Watch out for

Hard to qualify for anyone with a full-time job outside real estate. Requires detailed records, and the IRS frequently challenges it.

How it works

Owners who "actively participate" in managing their rentals (approving tenants, setting rents) may deduct up to $25,000 of rental losses against other income.

The math

Up to $25,000, phased out as modified AGI rises from $100,000 to $150,000

Example (hypothetical)

Hypothetical: an owner with $90,000 of income and a $12,000 rental loss may be able to deduct the full loss.

Who it fits

Moderate-income landlords.

Watch out for

Phases out completely at $150,000 of modified AGI. Unused losses carry forward to future years and are freed up when you sell.

How it works

Defer capital gains and depreciation recapture by selling an investment property and buying like-kind investment real estate. You must identify replacement property within 45 days and close within 180 days, using a qualified intermediary.

The math

Defer taxes when replacement value and debt are equal or greater, and all proceeds are reinvested

Example (hypothetical)

Hypothetical: sell a rental with a $150,000 gain and buy a larger rental, deferring the tax.

Who it fits

Investors trading up, consolidating or moving into different markets.

Watch out for

Cash you take out ("boot") is taxable. Deadlines are strict. Delaware Statutory Trusts (DSTs) can be passive replacement options but have their own risks and fees.

How it works

Investing capital gains into a Qualified Opportunity Fund can defer and reduce taxes, and gains on the new investment can be tax-free if held 10+ years. The 2025 federal tax law made the program permanent, with a new round of rules for investments made after December 31, 2026, including a 5-year deferral and 10% basis increase (30% for rural zones).

The math

Defer the original gain, plus potential tax-free growth after 10 years

Example (hypothetical)

Hypothetical: reinvest a $200,000 stock gain into a fund developing housing in a designated zone.

Who it fits

Investors with large capital gains and a long time horizon.

Watch out for

Zones are being redesignated (new map effective in 2027). Funds vary widely in quality. Requires careful legal and tax review.

How it works

When you sell your primary home after owning and living in it at least 2 of the last 5 years, you can exclude up to $250,000 of gain ($500,000 for married couples filing jointly).

The math

Exclusion up to $250,000 single / $500,000 married

Example (hypothetical)

Hypothetical: house hack a duplex, live there 2+ years, then sell. Part of the gain may be excluded, though rules apply to the rented portion and depreciation.

Who it fits

House hackers and owners moving out of a home they may keep as a rental.

Watch out for

Depreciation taken while it was a rental is still taxable, and periods of non-qualified use can reduce the exclusion.

How it works

When you seller-finance a sale, you can often spread the taxable gain over the years you collect payments instead of paying it all at once.

The math

Gain recognized each year ≈ principal received × gross profit percentage

Example (hypothetical)

Hypothetical: sell land for $400,000 with $80,000 down and payments over 10 years, spreading the gain out.

Who it fits

Owners of land or rentals who want income and to smooth out taxes.

Watch out for

Depreciation recapture is generally taxed in the year of sale, not spread out. You take on the buyer's default risk.

How it works

Heirs generally receive inherited property at its value on the date of death, which can wipe out built-up gain and depreciation recapture for income tax purposes.

The math

New basis ≈ fair market value at date of death

Example (hypothetical)

Hypothetical: a rental bought for $100,000 and worth $400,000 at death passes to heirs with a roughly $400,000 basis.

Who it fits

Long-term holders building generational wealth.

Watch out for

Estate planning rules are complex. Work with an estate attorney and CPA.

How it works

Rental activity that rises to the level of a trade or business may qualify for the Section 199A qualified business income deduction, up to 20%. It was made permanent by 2025 federal law. An IRS safe harbor uses 250+ hours of rental services a year, among other requirements.

The math

Up to 20% of qualified business income, subject to limits

Example (hypothetical)

Hypothetical: $40,000 of qualifying rental income may produce up to an $8,000 deduction.

Who it fits

Owners with several actively managed rentals.

Watch out for

Income limits and complex rules apply. Triple-net leases often do not qualify.

How it works

Some retirement accounts can own real estate, letting rental income and gains grow tax-deferred or tax-free (Roth).

The math

Account owns the property; all income and expenses run through the account

Example (hypothetical)

Hypothetical: a self-directed Roth IRA buys a rental with cash.

Who it fits

Investors with large retirement balances.

Watch out for

You cannot use or personally benefit from the property, and strict prohibited-transaction rules apply. Financed properties can create unrelated business taxes (UBIT).

How it works

Mortgage interest, property taxes, insurance, repairs, management fees, travel to your rentals, professional fees and HOA dues are generally deductible against rental income.

The math

Taxable rental income = rent − operating expenses − interest − depreciation

Example (hypothetical)

Hypothetical: $24,000 of rent minus $9,000 of expenses, $10,000 of interest and $8,700 of depreciation = a $3,700 tax loss while the property may still produce positive cash flow.

Who it fits

Every landlord.

Watch out for

Improvements must usually be depreciated, not deducted right away. Keep receipts and separate bank accounts.

How it works

South Carolina assesses a primary residence at 4% and most other residential property, including rentals and second homes, at 6%, so rentals pay noticeably higher property tax. South Carolina also allows a deduction for part of long-term capital gains (held more than one year) on your state return.

The math

Rental property tax ≈ appraised value × 6% × local millage

Example (hypothetical)

Hypothetical: two identical homes, one owner-occupied and one rented, can have very different tax bills.

Who it fits

Anyone buying a rental or second home in SC.

Watch out for

Millage rates and rules vary by county and change over time. Check with the county assessor and your CPA. North Carolina and Georgia rules differ.

Federal credits for energy-efficient new homes (45L) and deductions for energy-efficient commercial buildings (179D) were ended by the 2025 tax law for homes acquired, and commercial construction begun, after June 30, 2026. Projects that already qualified may still claim them. Ask your CPA.

Pricing depends on the property size, type and how detailed the study is. Ask several reputable, engineering-based providers for quotes and compare the projected tax savings against the fee with your CPA.

Sometimes. It tends to make more sense on higher-value homes, short-term rentals, and owners who can actually use the deductions (for example, through the short-term rental rules or real estate professional status). For lower-value long-term rentals, the savings may not justify the cost.

Often yes. A "look-back" study lets you catch up on missed depreciation in the current year through an accounting method change, without amending old returns. Your CPA files the paperwork.

Depreciation is generally recaptured and taxed when you sell, unless you defer it with a 1031 exchange or hold the property until death. Cost segregation does not eliminate tax. It moves deductions earlier, which can be valuable because of the time value of money.

In many Upstate SC neighborhoods, especially near the lakes and in Greenville, prices are high compared to rents, so few homes meet it. It is a screening tool, not a requirement. Many investors buy below 1% when the full cash-flow numbers still work and they expect long-term value growth.

It is rare. The properties that meet it are usually lower-priced, older or need major work, and they often have higher repair and vacancy costs.

There is no single number. Many investors look for positive cash flow after every expense, including reserves for vacancy, repairs and big-ticket items, plus a cash-on-cash return that beats their other options.

Investment loans commonly require 15% to 25% down, plus closing costs and cash reserves. House hacking with an owner-occupant loan can lower that. Talk to a lender for your exact numbers.

Sometimes, through seller financing, partners or creative deals, but those carry extra legal and financial risk. Most investors use their own cash or a loan with a down payment.

It can be, but higher rates mean larger payments after the refinance, so less cash flow and often more cash left in the deal. Run the numbers at today's rates in the BRRRR calculator.

It depends on the property type, location and risk. Lower cap rates usually mean safer, higher-demand areas, and higher cap rates usually mean more risk. Compare against similar properties nearby.

A DSCR loan qualifies you mainly on the property's income compared with its loan payment, instead of your personal income. Lender minimums and terms vary.

An LLC can offer liability separation, but financing, insurance and taxes can change. Ask a real estate attorney and a CPA before deciding.

Use real comparable sales, a realistic repair budget, actual expenses (taxes, insurance, HOA) and market rent. Run the numbers before you write the offer.

Flipping can bring faster profits but is taxed as income and has more market risk. Renting builds long-term wealth more slowly but steadily. Many investors do both.

Yes, but land and construction loans usually need bigger down payments and detailed plans. Many projects also use partners or private money.

Common reasons include low return on equity, major upcoming repairs, a better opportunity (possibly through a 1031 exchange), or personal goals. Compare keeping, refinancing and selling.

Yes. JW Martin Property Management handles leasing, rent collection and maintenance for owners across the Upstate.

Yes. Tell us your investor buy box (location, budget, strategy and property type) and our team will watch for on-market and off-market opportunities.