Level 3

Managerial controls

Rules that decide when to buy, when to hold and when to stop, before emotions do. Every tool on this page starts empty and uses only the numbers typed in.

Portfolio health check

Monthly rent if every house were full ($)Monthly vacancy and bad-debt loss ($)Monthly operating expenses ($)Monthly loan payments ($)Cash reserves ($)Total loan balances ($)Portfolio value ($)Number of houses

The thresholds

Portfolio debt coverage (net operating income divided by loan payments): green 1.35 or more, amber 1.20 to 1.35, red under 1.20.
Loan-to-value (all loans divided by portfolio value): green 65% or less, amber up to 75%, red above 75%.
Reserves (cash divided by monthly expenses plus payments): green 6 months or more, amber 3 to 6, red under 3.
Break-even occupancy (expenses plus payments divided by full rent): green 80% or less, amber up to 90%, red above 90%.
Expense ratio (expenses divided by collected rent): green 45% or less, amber up to 55%, red above 55%.
Maturity wall: red if any loan matures or balloons within 12 months with no refinance lined up; amber within 24.
Plan versus actual: amber if any key number is 5% worse than plan, red at 15%.

Plan versus actual

Use the plan builder's number for this age and the actual number from the books.

Houses, planHouses, actualDebt, plan ($)Debt, actual ($)Yearly net rent, plan ($)Yearly net rent, actual ($)Cash reserves, plan ($)Cash reserves, actual ($)

Approval limits and separation of duties

Owner sets the dollar limits in writing. A common structure ties them to reserves, so limits grow with the portfolio.
Manager or staff: routine repairs up to a small limit per job, with photos before and after.
Owner: anything above that, every new vendor, every lease exception, every rent change.
Owner plus a second person (spouse, partner, CPA or advisor): any purchase, sale, new loan, refinance, or a payment above the high limit.
Never alone: the same person should not both approve and pay a bill, or both add a vendor and pay it.

Account structure

Operating: rent in, bills out.
Security deposits: held exactly as the state requires; never used for operations.
Reserves: the six-month policy. Not touched for purchases.
Replacements: roofs, heating, water heaters, monthly set-aside per house.
Taxes: a monthly set-aside for property and income tax.

Control calendar

Monthly: bank reconciliations, health check, plan versus actual, gate color, late-rent report.
Quarterly: servicer audit (extra payments went to principal), vendor scorecards, insurance claims review, access review (who can move money).
Yearly: stress drill (rates +2 points, rents −10%), plan rerun, outside review of the books by the CPA, key-person plan updated.

The operating system: Levels · Plan builder · Operations · Controls · Financing · Relationships

Hypothetical, not guaranteed. Educational only. Not legal, tax or investment advice. Confirm every rule with a licensed professional in the state where the property is.