Real Estate Math Made Easy: Quick Numbers for Smart Decisions

Ever felt lost when a listing throws out numbers like "7.5% cap rate" or "3X rent"? You’re not alone. Most buyers and renters just need a couple of simple formulas to see if a deal makes sense. Below are the core calculations you’ll use daily, explained in plain English.

1. Spotting a Good Investment: Cap Rate and Cash‑On‑Cash

The cap rate tells you the return on a property before financing. Take the annual net operating income (NOI) and divide it by the purchase price. Example: a shop earns $45,000 a year after expenses and costs $600,000. $45,000 ÷ $600,000 = 0.075, or 7.5% cap rate. If the market average is 6%, this property is a winner.

Cash‑on‑cash is the return on the money you actually put down. If you paid $120,000 down and the property gives you $12,000 cash flow after mortgage, that’s $12,000 ÷ $120,000 = 10% cash‑on‑cash. Use both numbers to compare deals side by side.

2. Renting Smart: Yield, Rent Increases & 3X Rule

Rental yield is simple: annual rent ÷ purchase price. A 2BHK in Mumbai rents for ₹30,000 per month, so ₹360,000 a year. If the flat costs ₹9,000,000, the yield is 360,000 ÷ 9,000,000 = 4%.

Many landlords in big cities demand a tenant earn at least three times the rent. If the rent is $2,500, you’ll need $7,500 monthly income. Knowing this helps you prepare documents early.

Know the legal cap on rent hikes, too. In Baltimore, landlords can raise rent up to 5% per year plus inflation. Check local rules so you don’t get shocked by a sudden increase.

3. Buying Basics: Mortgage Math & Total Cost

Use the 28/36 rule: keep housing costs under 28% of gross monthly income and total debt payments under 36%. If you earn $5,000 a month, aim for mortgage, taxes and insurance below $1,400.

Don’t forget stamp duty and registration fees. In Mumbai 2025, stamp duty is 5% of the property price plus a 1% surcharge. For a ₹10,000,000 flat, that’s ₹600,000 in extra costs. Adding these numbers to your budget prevents nasty surprises at closing.

4. Quick Land Size Check: Acres to Miles

One acre equals 43,560 square feet, which is about 0.00156 square miles. If you’re eyeing a plot of 5 acres, that’s roughly 0.0078 square miles – a handy mental picture for visualizing land size.

Use these conversions when comparing rural land deals; they’re especially useful when listings switch between metric and imperial units.

5. Real‑World Tips to Speed Up Your Math

Keep a spreadsheet ready with columns for price, rent, NOI, cap rate, cash‑on‑cash and total cost. Fill it in as soon as you get a listing. The numbers will line up, and you won’t waste time doing mental math on the spot.

Lastly, don’t rely on any single metric. A property with a high cap rate but low cash‑on‑cash might need a big loan, which could kill your cash flow. Balance the figures, check the local market, and you’ll make decisions with confidence.

Real estate math isn’t rocket science—it’s just a few formulas that turn big numbers into clear answers. Use them, and you’ll know when a deal is a bargain, a break‑even, or a red flag.