How Kaison Underwrites Deals
Why Kaison's Numbers Look Different
The one-sentence version
Your napkin math says rent minus mortgage. Kaison says rent minus vacancy, management, maintenance, CapEx, insurance, taxes, and THEN mortgage. The gap between those two numbers is the cost of owning a rental property professionally.
When you find a property and do quick math — $1,650 rent minus a $1,044 mortgage — you get $606/month. That looks great. But run it through Kaison and you might see −$161/month. That is not a bug. Kaison is deducting five categories of real costs that napkin math skips.
These costs are not hypothetical. Vacancy happens. Things break. Property managers charge fees. Roofs wear out. Taxes and insurance are non-negotiable. By modeling them upfront, Kaison shows you what the property actually earns — not what it earns in a perfect month.
Napkin Math vs Kaison
Napkin Math
$1,650 rent
−$1,044 mortgage
= +$606/mo
Kaison Underwriting
$1,650 rent
−$132 vacancy
−$635 operating expenses
−$1,044 mortgage
= −$161/mo
The Cashflow Waterfall
The Cashflow Waterfall in your analysis results shows every dollar flowing from gross rent to monthly cashflow. Each line item is a real cost with a tooltip explaining what it is and how it is calculated.
Gross Monthly Rent $1,650
− Vacancy (8%) −$132
————————————————————
Effective Gross Income $1,518
− Property Management (10%) −$152
− Maintenance (12%) −$182
− CapEx Reserve (8%) −$121
− Insurance −$90
− Property Tax −$90
————————————————————
Net Operating Income $883
− Monthly Mortgage (75% LTV) −$1,044
————————————————————
Monthly Cash Flow −$161
Every number in this waterfall uses actual values from your deal inputs. The percentages next to each line show the rate applied. Hover any label to see a definition and the formula.
Operating Expense Reserves
Operating expenses are applied to Effective Gross Income (after vacancy), not gross rent. This is the correct accounting treatment and prevents double-counting vacancy in your expense calculations.
Vacancy Reserve (8% of gross rent)
Between tenants: turnover, cleaning, marketing, and make-ready time. Even in strong markets, expect some vacancy. Deducted from gross rent before anything else.
Property Management (10% of EGI)
What a property manager charges to handle tenant communication, rent collection, and maintenance coordination. Model this even if self-managing — your time has value, and the deal should work without you.
Maintenance & Repairs (12% of EGI)
Routine repairs: leaky faucets, appliance issues, HVAC servicing, plumbing. Higher for older properties. Post-rehab properties may justify a lower rate for the first few years.
CapEx Reserve (8% of EGI)
Long-term capital expenditures: roof replacement (20-25 year cycle), HVAC replacement (15-20 years), water heater, flooring. Reserving monthly prevents cash crises.
Why these rates?
Kaison defaults are calibrated to post-rehab residential investment properties in average US markets. You can adjust every rate per deal. As you file retrospectives, Kaison learns your actual variance and adjusts defaults for your portfolio.
Score Components
Every deal gets a score from 0 to 100. The score is built from five transparent components, each visible in the Score Breakdown section. No black boxes.
| Component | BRRRR | Flip | What It Measures |
|---|---|---|---|
| Cashflow / Profit | 0–25 | 0–30 | Monthly cashflow vs minimum (BRRRR) or profit margin (flip) |
| ROI / CoC | 0–25 | 0–25 | Cash-on-cash return vs minimum threshold |
| ARV Confidence | 0–20 | 0–20 | Comp quality + spread tightness |
| Timeline Risk | 0–15 | 0–15 | How much P90 erodes your returns |
| Market Absorption | 0–15 | 0–10 | Average days on market in the submarket |
Gate thresholds
GO ≥ 65 points with no warnings. MARGINAL ≥ 50 points or has warnings. NO_GO < 50 points or any critical flag. Critical flags force NO_GO regardless of score.
Risk Flags
Risk flags are specific conditions in your deal that deserve attention. They come in two severities:
Critical
Forces a NO_GO gate regardless of score. Must be resolved before proceeding.
Warning
Does not block a GO gate but prevents it from being clean. Review before committing.
Common flags include: NEGATIVE_CASHFLOW (critical), LOC_INSUFFICIENT (critical), INSUFFICIENT_COMPS (critical), RENT_ABOVE_COMPS (critical), P90_EQUITY_SQUEEZE (critical), COC_BELOW_MINIMUM (warning), CASHFLOW_BELOW_MINIMUM (warning), and CAPITAL_NOT_RECYCLING (warning). Hover the flag name in your analysis results for details.
P90 Stress Testing
Every analysis runs two scenarios: Target (everything goes to plan) and P90 (90th percentile adverse). P90 models what happens when your rehab runs long, marketing takes longer, and costs come in high.
| Confidence | Timeline Buffer | Contingency |
|---|---|---|
| High (quotes in hand) | +15% | 12% |
| Medium (walkthrough done) | +30% | 18% |
| Low (pre-inspection) | +50% | 25% |
A deal that scores GO at target but NO_GO at P90 is a MARGINAL deal. It works if everything goes right, but has limited margin for error. Read Understanding Your P90 Report for more.
LTV Strategy Comparison
Every BRRRR analysis includes a side-by-side comparison of two LTV scenarios (typically 70% and 75%). This shows the fundamental BRRRR tradeoff:
Higher LTV (75%) — Max Cash Out
Larger refi loan → more cash back → less money trapped. But higher mortgage payment means lower monthly cashflow and may push DSCR below lender minimums.
Lower LTV (70%) — Cashflow Priority
Smaller refi loan → less cash back → more capital trapped. But lower mortgage payment means better monthly cashflow and stronger DSCR for lender qualification.
The analysis includes a plain-English insight line that calculates how long the cashflow difference takes to recover the capital gap. Use this to decide which strategy fits your current capital situation.
Educational content only. Consult a CPA or attorney for advice specific to your situation.