How we score a deal

Every NestCalc Deal Score is a starting estimate built from public data. It is not an appraisal. This page covers where each number comes from, what we calculate, what makes a WIN, and how scores change over time.

On a WIN's own page you can enter your own rent, property tax and insurance to see your own score. What you enter never changes the published score.

See every Cincinnati score

What goes into the numbers

  • Cash flow
  • Cap rate
  • Cash-on-cash
  • DSCR
  • Vacancy and reserves
  • 15-year hold and sale

Where the inputs come from

Rent
HUD's Fair Market Rent for the listing's ZIP code and bedroom count (HUD's Small Area figures), used as HUD publishes it. It is HUD's estimate of a typical rent, not a quote for this home, and it is a gross rent: it includes utilities, and we do not take them out. Where HUD has no figure for the ZIP code, we use its metro-wide figure, and that listing can never be a WIN. A home with 5 or more bedrooms uses HUD's own rule: the 4-bedroom figure plus 15% for each extra bedroom. A two- or three-family building is priced one unit at a time. We take the bedroom count from the listing, split it evenly across the units the county records, rounding down, and use HUD's figure for a unit of that size (the studio figure if that comes to less than one bedroom), times the number of units. When the listing gives no bedroom count, we use HUD's 1-bedroom figure for each unit, and the building can never be a WIN.
Property tax
The county's actual tax bill for the parcel, from Hamilton County's records. When those records show the seller gets a homestead exemption or an owner-occupancy credit, which an investor buying the home would not get, we add it back. Where we have no bill, we use our own estimate from the county's typical tax rate at that price, and that listing can never be a WIN.
Insurance
A typical homeowner's premium in Ohio for a home at that price, from the state averages insurance regulators publish (NAIC), raised to today's prices. It is not a quote.
The loan
20% down and a 30-year fixed loan at Freddie Mac's weekly average rate, shown with its date on each WIN's page, plus 1 point and closing costs of 3% of the price.
Operating costs
Vacancy of 6% of the rent, property management at 8%, maintenance at 5%, and a 5% reserve for big replacements such as a roof or a furnace. These are flat percentages, the same for every home, not an estimate of any home's condition. HOA dues come from the listing when it has them.

What we calculate

Monthly cash flow
The rent after vacancy, minus the operating costs, property tax, insurance, HOA dues and the mortgage payment.
Cap rate
A year's net operating income (the rent after vacancy, minus operating costs, tax, insurance and HOA dues, before the mortgage) as a percentage of the price.
Cash-on-cash
A year's cash flow as a percentage of the cash you put in: the down payment, the closing costs and the point.
Debt coverage (DSCR)
Net operating income divided by the year's mortgage payments. Under 1.0, the rent after costs does not cover the loan.
Return over a 15-year hold
The yearly return (IRR) if you bought at the price, held for 15 years and then sold. It assumes the value grows 3% a year, rent 2.5% a year from the second year, property tax 2% and insurance 3% a year, selling costs of 8%, and the tax benefit of depreciation and mortgage interest at a 24% tax bracket.
The score
One number from 0 to 100 that weighs the 15-year return (40%), cash-on-cash (25%), debt coverage (20%), cap rate (10%) and the rent as a share of the price (5%). Strong is 80 and up, Fair 50 to 79, Caution 20 to 49, and High risk under 20. A score of 90 or higher is labelled Outstanding: the top of the Strong band.

The calculations use the same buy-and-hold math as HomeFastCalc, our published calculator app.

What makes a WIN

We rank every listing that can be a WIN (see below) by cash-on-cash return, then by debt coverage, then by cap rate. The top 10% are WINs.

There is a floor under that: a listing that loses money each month, or whose rent after costs does not cover the mortgage payment, is never a WIN, however high it ranks.

A WIN is relative, not a fixed score. The ranking is redone every time new listings are scored.

Which listings can be a WIN

Every home listing we can score gets a score. We skip land, apartment buildings, and listings with no bedroom count or no HUD rent figure. Only a listing that passes all of these can be a WIN:

  • It is still on the market.
  • It has 1 to 4 bedrooms.
  • Its price is between half and one and a half times the typical list price in its ZIP code, or citywide when the ZIP code has fewer than 5 listings.
  • A year's rent is no more than 14% of the price.
  • Its property tax is the county's actual bill, not our estimate.
  • Its rent is HUD's ZIP-code figure, not the metro-wide figure or the 5-bedroom rule.
  • It is one home on its own parcel, a house or a condo unit: not one unit of a building with several, and not a parcel shared with another listing.
  • Its listing type does not mark a distressed sale, such as a foreclosure, short sale, auction or as-is sale.

A duplex, triplex or fourplex can be a WIN too, ranked in the same list as single homes. Instead of the bedroom test and the one-home test above, it must pass all of these, and every other test above:

  • The listing gives the building's bedroom count, so each unit's size comes from the listing, not from us.
  • The listing itself says it is a multi-family building, and the county records it as two to four units. We count four only when the county's record says exactly four.
  • No other listing is on the same parcel, and we did not have to guess which parcel at its address it is.

A building that fails one of these is still scored and shown on the board, but it cannot be a WIN.

How scores change over time

  • A listing is scored once, when it first appears. A score is never edited: a new score is saved as a new version, and the old one is kept.
  • When a public input changes (HUD publishes new rents, or the county issues a new bill), the listings it affects are scored again.
  • When our method changes, every listing it affects is scored again at once. The new version keeps the price, tax, insurance and loan terms of the version it replaces; only the part of the method that changed is different.
  • A price change alone does not re-score a listing. Its page shows the price we scored and today's price.
  • Listings that leave the market stay on the board as an archive, marked Off market. They are never WINs.
  • No one can change a published score: not a visitor, an agent or a seller.

What we never do

  • We never estimate repairs or a home's condition.
  • We never use listing photos or the listing's description.
  • We never present a score as an appraisal or as advice. It is a starting estimate from public data.

Read the full disclaimer