Evaluating Your First Property
Difficulty: Beginner
In this tutorial, you'll learn how to use mortgage-cli to evaluate a rental property investment. We'll walk through a real scenario step by step.
What You'll Learn
- How to run a basic property analysis
- Understanding the output metrics
- Interpreting the verdict system
- Exploring different down payment options
Prerequisites
- mortgage-cli installed (
pip install mortgage-cli) - Basic understanding of rental property investing
The Scenario
You've found a promising apartment listing:
| Detail | Value |
|---|---|
| Location | Lyon, France |
| Asking Price | €145,000 |
| Expected Rent | €850/month |
| Type | 2-bedroom apartment |
You have €45,000 saved for investment. Let's see if this property makes financial sense.
Step 1: Run Your First Analysis
Let's start with a basic analysis using the default 20% down payment:
mortgage-cli analyze --price 145000 --rent 850
You should see output like this:
┏━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━┳━━━━━━━━━━━━━━━━━━┓
┃ Metric ┃ Value ┃
┡━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━╇━━━━━━━━━━━━━━━━━━┩
│ Property Price │ €145,000 │
│ Down Payment │ 20% (€29,000) │
│ Loan Amount │ €116,000 │
├────────────────────────────────┼──────────────────┤
│ Monthly Mortgage Payment │ €681 │
│ Monthly Fixed Costs │ €180 │
│ Break-even Rent │ €861/month │
├────────────────────────────────┼──────────────────┤
│ Expected Rent │ €850/month │
│ Monthly Shortfall │ -€11 │
│ Cash-on-Cash Return │ -0.4% │
├────────────────────────────────┼──────────────────┤
│ Total Upfront Costs │ €33,388 │
│ Within Budget │ Yes │
│ Verdict │ YELLOW │
└────────────────────────────────┴──────────────────┘
Step 2: Understanding the Output
Let's break down what each metric means:
The Numbers
| Metric | Value | What It Means |
|---|---|---|
| Down Payment | €29,000 | Cash you put down (20% of €145,000) |
| Loan Amount | €116,000 | What you're borrowing |
| Monthly Mortgage | €681 | Your loan payment (principal + interest + insurance) |
| Fixed Costs | €180 | Property tax, insurance, maintenance |
| Break-even Rent | €861 | Minimum rent to cover all costs |
The Verdict
The YELLOW verdict means this is a marginal investment:
- Break-even rent (€861) is very close to expected rent (€850)
- You'd have a small monthly shortfall of €11
- The investment works, but with no safety margin
- GREEN: Break-even rent is below 90% of your target - comfortable margin
- YELLOW: Break-even rent is 90-100% of target - it works, but tight
- RED: Break-even rent exceeds target - you'd lose money monthly
Step 3: Try a Higher Down Payment
Since you have €45,000 available, let's see if putting more down improves the situation:
mortgage-cli analyze --price 145000 --rent 850 --down 25%
┏━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━┳━━━━━━━━━━━━━━━━━━┓
┃ Metric ┃ Value ┃
┡━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━╇━━━━━━━━━━━━━━━━━━┩
│ Property Price │ €145,000 │
│ Down Payment │ 25% (€36,250) │
│ Loan Amount │ €108,750 │
├────────────────────────────────┼──────────────────┤
│ Monthly Mortgage Payment │ €639 │
│ Monthly Fixed Costs │ €180 │
│ Break-even Rent │ €819/month │
├────────────────────────────────┼──────────────────┤
│ Expected Rent │ €850/month │
│ Monthly Surplus │ €31 │
│ Cash-on-Cash Return │ 0.9% │
├────────────────────────────────┼──────────────────┤
│ Total Upfront Costs │ €40,638 │
│ Within Budget │ Yes │
│ Verdict │ GREEN │
└────────────────────────────────┴──────────────────┘
Much better! With 25% down:
- Break-even rent drops to €819 (from €861)
- Monthly surplus of €31 instead of shortfall
- Verdict changes from YELLOW to GREEN
- Still within your €45,000 budget
Step 4: Compare Multiple Scenarios
Let's quickly compare different down payment amounts:
mortgage-cli analyze --price 145000 --rent 850 --down 30%
│ Down Payment │ 30% (€43,500) │
│ Break-even Rent │ €776/month │
│ Monthly Surplus │ €74 │
│ Cash-on-Cash Return │ 1.8% │
│ Total Upfront Costs │ €47,888 │
│ Verdict │ GREEN │
Wait - the upfront costs (€47,888) exceed your €45,000 budget! Let's check what the tool says:
│ Within Budget │ No │
So 30% down gives better cash flow but requires more capital than you have.
Summary of Options
| Down Payment | Break-even | Monthly Cash Flow | Upfront Cost | Verdict |
|---|---|---|---|---|
| 20% | €861 | -€11 | €33,388 | YELLOW |
| 25% | €819 | +€31 | €40,638 | GREEN |
| 30% | €776 | +€74 | €47,888 | GREEN (over budget) |
Step 5: Get a Detailed Summary
For a narrative explanation you can share with others, use the summary output:
mortgage-cli analyze --price 145000 --rent 850 --down 25% --output summary
INVESTMENT SUMMARY
==================================================
A €145,000 property with 25% down (€36,250) would require
€819/month in rent to break even.
At the expected rent of €850/month, this represents
a monthly surplus of €31.
Total upfront investment: €40,638 (within your €50,000 budget)
Cash-on-cash return: 0.9%
RECOMMENDATION:
Good investment opportunity. Break-even rent is comfortably below
your target, providing a margin of safety.
Step 6: Save for Your Records
Export the analysis to JSON for your records:
mortgage-cli analyze --price 145000 --rent 850 --down 25% --output json > lyon-apartment.json
What You've Learned
In this tutorial, you've learned how to:
- ✅ Run a basic property analysis with
mortgage-cli analyze - ✅ Interpret break-even rent and monthly cash flow
- ✅ Understand the GREEN/YELLOW/RED verdict system
- ✅ Compare different down payment scenarios
- ✅ Export results in different formats
Try It Yourself
Practice with these exercises:
-
Change the rent: What if you could only get €800/month? What down payment would you need for a GREEN verdict?
-
Negotiate the price: If you negotiated the price down to €135,000, how does the analysis change with 20% down?
-
Different property: Run an analysis on a €200,000 property with €1,100/month expected rent.
Next Steps
Ready for more? Continue to the next tutorial:
- Finding Your Price Range - Use the sensitivity matrix to explore multiple scenarios at once