Rental Investing 101
Every number we show you, in plain English
PhillyFlow underwrites every Philadelphia listing like a skeptical investor would. This page explains what the numbers mean, the rules of thumb investors actually use, and — most importantly — what to verify before you trust anyone's math, including ours.
The core numbers
Cash flow
What's left of the monthly rent after the four unavoidable costs: the mortgage payment, property taxes, insurance, and an allowance for vacancy (tenants leave; units sit empty). If a $168,000 rowhouse rents for $1,450 and those costs total $1,116, cash flow is +$334/mo. Positive cash flow means the property pays you to own it; negative means you pay it. We compute this with Philadelphia's actual assessed taxes, not a guess.
Cash flow after reserve
The same number after also setting aside 8% of rent for repairs — because water heaters die and roofs leak. This is the smaller, uglier, more honest number, and it's the one we'd underwrite with. Plenty of deals look great until the reserve line.
Cap rate
The property's yearly operating income divided by its price, as a percentage — what the building earns regardless of how you finance it. A 7% cap rate on a $168,000 house means ~$11,800/yr of income after operating costs. Use it to compare properties to each other; in Philadelphia's rental neighborhoods, roughly 6–8% is typical and anything into the teens deserves suspicion, not excitement.
Cash-on-cash return (CoC)
Your yearly cash flow divided by the cash you actually put in (down payment plus closing costs). It answers the only question that matters to a small investor: what does my money earn here? 8–12% is solid; 15%+ is exceptional — and above ~25%, the input numbers are usually wrong, not the deal usually great.
The 2% rule (and why we use it backwards)
An old rule of thumb says a great rental's monthly rent is 1–2% of its purchase price. Deal-finding sites love showing you properties that "beat" it. We use it the other way: when a listing's estimated rent exceeds 2% of the price, we flag the deal as too-good-to-be-true and demote it — because at that ratio, the usual explanation is an inflated rent estimate, a war-zone block, or a property that needs $60k of work. Numbers that good are almost never real.
Rent estimates and comps
Nobody knows what a unit will rent for until a tenant signs. What exists: statistical estimates and comps — actual nearby rentals. When we have 5+ tight comps, our estimate comes from them (you'll see "backed by 15 nearby rentals" on the card). When two independent estimates agree within 10%, we badge it. When they disagree badly, we tell you the rent is unproven. The rent estimate is the single biggest lever in every calculation — which is why it's the first thing to verify.
Our financing assumptions
Every cash-flow number assumes a standard investor loan: 20% down, 30-yr fixed at current rates, real Philadelphia assessed taxes, $100/mo insurance, 5% vacancy, 8% repair reserve. Your actual loan quote will move the numbers — re-run the math with it before offering.
How PhillyFlow ranks deals
Believability first, returns second. Deals that fail the 2% rule, are priced like rehabs, or have disagreeing rent estimates rank below every clean deal, no matter how big their headline number. Within each group, we rank on the conservative return — cash flow computed at the low end of the rent range — and display the midpoint. Big numbers don't win our rankings; defensible numbers do. Most deal-alert products do the opposite, which is why their inboxes are full of $2,100-rent rowhouses that rent for $1,200.
What the badges mean
✓ YOUR CRITERIAClears your saved filters — Pro digests deliver only these.
🔥 GEMA top-decile deal whose numbers survived every believability check — Pro members got an instant alert when it surfaced. These typically get offers within 24–72 hours.
✓ 2 ESTIMATES AGREETwo independent rent estimates land within 10% of each other — the strongest rent signal we show.
NEWFresh listing, no flags — the numbers held up as-is.
WIDE RENT RANGEOur estimate is backed by nearby rentals, but rents in this area genuinely vary. The ranking already uses the conservative low end.
TAXES ESTIMATEDNo city assessment record matched this address, so property taxes in the math are estimated from the purchase price. Verify the assessment before underwriting.
UNIT MIX UNVERIFIEDA duplex or triplex whose unit count we couldn't confirm. We underwrite with a conservative whole-building rent instead of multiplying a guess — confirm the unit mix; real rents may run higher.
RENT EST. UNCERTAINThe rent estimate itself is shaky — a single model's guess, or numbers that look too good to be true. Verify with a local property manager before underwriting.
PRICED FOR CONDITIONPriced well below the area's going $/sqft, or the listing language signals a rehab — budget renovation costs before trusting the cash flow.
RANKED #N · PRO 🔒Free plan: this deal outranked your unlocked ones — the underwriting is Pro-only.
Deal status — what happened after we sent it
PENDINGWent under contract after we sent it — the market agreed with the math.
GONESold or delisted since we sent it. Your past digests keep the record.
BACK ON MARKETA deal that went pending fell out of contract and is buyable again — often the fastest second chance in the market.
PRICE CUTThe asking price dropped on a deal from your digests — the numbers just got better.
Before you make an offer
We find and underwrite; you verify. The 30-minute diligence list:
- Call one local property manager and ask what the unit really rents for. Free, takes ten minutes, and it's the highest-value phone call in real estate.
- See the property. Photos hide $40,000 problems. Anything badged PRICED FOR CONDITION, assume a rehab until proven otherwise.
- Check the tax record for abatements about to expire or reassessment risk — Philadelphia taxes can jump.
- Get a real loan quote and re-run the cash flow with your rate and down payment.
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