The cash-on-cash return is the number I watch most closely, and I think it misleads more investors than any other figure on the page.

The break-even occupancy point you made is the one I wish more people led with, because 93 percent on a single-tenant house is genuinely tight. On the 47 acres I am still underwriting out here, I am running break-even scenarios first and building the income assumption backward from there, not forward from some rent estimate I pulled off Zillow at midnight. My operating expense line when I model SFR includes taxes, insurance, a maintenance reserve I set at 10 percent of gross rent, and property management even when I plan to self-manage, because self-managing is a plan that breaks. Vacancy I pull out as its own line, and I model it as a hard number of weeks, not a percentage, exactly because of what you said about one tenant being either zero or a hundred. The 8 percent average thing drives me crazy, it is actuarial math applied to a single event that has no distribution.

The math here is clean and the point about binary vacancy in a single-tenant house is one of the most practically important things a beginner can absorb early.

For anyone reading this who is newer to the terminology: cash-on-cash return (CoC) measures the annual cash income from a property divided by the cash you actually put in. Gross rent multiplier (GRM) is the purchase price divided by annual gross rent, a quick ratio that tells you whether a price is in the neighborhood of reasonable before you build a full model. Break-even occupancy is the percentage of the year a property needs to be rented just to avoid losing money.

On the original question about operating expense lines: I see two common setups in beginner models. The first folds vacancy into the expense percentage as a flat assumption, usually 5 to 10 percent. The second keeps vacancy as a separate scenario column. The separate-scenario approach is more honest for single-family because, as you said, a single tenant means the actual outcome is 0 or 100, not a smooth average. A flat percentage works better across a portfolio of many units, where the law of averages starts to apply.

The one thing beginners often do not think to include in the operating expense line is capital expenditure reserves, sometimes called CapEx. These are funds set aside monthly for major items like a roof, water heater, or HVAC. Your HVAC example is exactly this. A common rule of thumb is 5 to 10 percent of gross rent set aside monthly, but the right figure depends on the age and condition of the specific property. That reserve does not show up in cash-on-cash at all, which is part of why CoC alone can make a property look more profitable than it is.

For anyone wanting to think through which analysis approach fits their situation, the strategy guide on the SFR page in Rena covers this in more depth.

What age is the mechanical infrastructure on the properties you are currently evaluating, and are you building a CapEx reserve into your expense line or tracking it separately?