How to Analyze a Rental Property (the 30-Second Version and the Right Way)
Most rental analysis fails at the same spot: the expense line. New investors take the rent, subtract the mortgage, and call the rest cash flow. Owners know better — the gap between those two numbers is where deals die.
The five numbers that decide everything
1. Real rent, not listed rent. Listing claims run 15-25% above market data in our testing. Pull comps or an automated estimate; underwrite at the median, stress-test at the low end. If the deal only works at the seller's number, it doesn't work.
2. The full expense load. Taxes, insurance, vacancy (5-8%), maintenance (5-10% of rent), capex reserves, management (8-10% even if you self-manage — your time isn't free). On most single-families the total operating load lands near 35-45% of rent. A pro-forma showing 20% is telling you a story.
3. DSCR — the lender's number. Net operating income ÷ annual debt service. Banks want 1.20+; below 1.0 the property can't pay its own mortgage. This single ratio predicts whether you can refinance, scale, and survive a bad year.
4. Cash-on-cash return. Annual cash flow ÷ total cash in (down payment + closing + rehab). This is your money's actual wage. Compare it honestly against doing nothing with the cash.
5. The price that works backward. Instead of asking "does this price work," compute the maximum price at which your target cash flow survives. That number is your negotiation anchor.
Run these live in the rental property calculator — real underwriting math, free.
The 30-second version
We built AgenticREI to do all five steps from just an address: it pulls the property records and market rent estimate, runs the deterministic underwriting engine across six strategies, and returns a straight BUY, NEGOTIATE, or PASS with every number shown. The AI explains the math; a tested calculation engine does the math. Three analyses are free.
The mistake that outranks all others
Analyzing only one strategy. The same property that fails as a standard rental can be a BUY by the room, or the ARV math might make it a flip. Strategy is a variable, not a given — run all six before you pass.