How do I calculate if a Twin Cities rental property is actually profitable?

Monthly Income:

• Gross rental income: $
• Less: Vacancy allowance (5%): $
• Less: Rent concessions/loss to lease: $
• Effective Gross Income: $

Monthly Expenses:

• Mortgage (P&I): $
• Property taxes: $
• Insurance: $
• Maintenance reserve (5% of gross rent): $
• Property management (8-10%, if used): $
• HOA fees (if applicable): $
• Capital expenditure reserve (5%): $
• Utilities (if landlord-paid): $
• Total Expenses: $

The Three Profitability Metrics

1. Cash Flow = Effective Gross Income - Total Expenses. This needs to be positive. Even $100/month means the property pays for itself.

1. Cap Rate = Net Operating Income / Purchase Price. Target 5%+ in Minneapolis. 7%+ in St. Paul or North Minneapolis.

1. Cash-on-Cash Return = Annual Cash Flow / Total Cash Invested. This accounts for your down payment, closing costs, and initial repairs. Target 8%+.

The four things most investors forget:

1. Capital expenditure reserve (roof, HVAC, appliances — they WILL need replacing)
2. Vacancy (tenants leave, and finding new ones takes time)
3. Property tax increases (Minnesota reassesses regularly)
4. Insurance cost increases (15-20% in the last two years alone)

My rule: If a property doesn't cash flow positive with ALL reserves funded, it's not an investment — it's a speculation. Pass.