How to Analyze a Rental Property Deal in 15 Minutes
Most rental property deals aren’t worth your time. The sooner you can figure out which ones fall into that category, the sooner you can focus on the ones that actually make money. The good news is you don’t need a complicated spreadsheet or a finance degree to evaluate a deal quickly. You need four numbers and about fifteen minutes.
Step 1: Estimate Monthly Income (2 Minutes)
Start with the expected monthly rent. Don’t use the seller’s “pro forma” numbers — those are wish lists. Look up comparable rentals on Zillow, Apartments.com, or Rentometer for the same area, bedroom count, and condition. Use the realistic number, not the optimistic one.
Now subtract vacancy. Use 8% for strong rental markets and 10% for average ones. If you’re in an area with high turnover or seasonal rentals, use 12%. This gives you your effective gross income.
Example: $1,200/month rent × 0.92 (8% vacancy) = $1,104 effective monthly income.
Step 2: Calculate Monthly Expenses (5 Minutes)
This is where most investors get it wrong. They forget expenses or underestimate them. Here’s the full list:
Property taxes — check the actual tax bill on your county assessor’s website, not Zillow’s estimate. Divide the annual amount by 12.
Insurance — get a quote for a landlord policy (not homeowner’s). Divide annually by 12. Budget $80-$150/month for a typical single-family rental.
Maintenance — budget 10% of monthly rent. Yes, it feels high. No, it’s not. One HVAC repair can eat half a year’s maintenance budget.
Capital expenditures — budget 5% for a newer property, 8% for an older one. This is your reserve for the roof, water heater, driveway, and other big-ticket items that don’t break every year but cost thousands when they do.
Property management — even if you self-manage, include 8-10%. Your time has value. And if you ever want to stop managing yourself, this number is already baked into your deal.
Mortgage payment — principal and interest on a 30-year fixed at your current rate. Don’t forget to include PMI if you’re putting less than 20% down.
Add it all up. That’s your total monthly cost.
Step 3: Calculate Cash Flow (1 Minute)
Effective monthly income minus total monthly expenses equals your monthly cash flow. This is the actual money that lands in your account each month after everything is paid.
If this number is negative, the deal doesn’t work — at least not at the current price or rent level. If it’s under $100/month per unit, it’s thin. Most experienced investors target $200+ per unit per month as a minimum.
Step 4: Run the Return Metrics (5 Minutes)
Cap Rate — take your annual net operating income (rent minus all expenses except mortgage) and divide by the purchase price. A property earning $8,400/year in NOI purchased for $120,000 has a 7% cap rate. This tells you how the property performs as an investment regardless of financing.
Cash-on-Cash Return — take your annual cash flow (after mortgage) and divide by the total cash you invested (down payment + closing costs + any rehab). If you invested $28,000 and the property returns $2,400/year in cash flow, your cash-on-cash return is 8.6%. Compare this to what your money would earn in a savings account or index fund — if it’s not significantly better, the hassle of being a landlord isn’t worth it.
DSCR — net operating income divided by annual mortgage payments. If this is below 1.25, the property barely covers its debt. Lenders want 1.25+. You should want 1.4+.
Step 5: Make the Call (2 Minutes)
You now have cash flow, cap rate, cash-on-cash return, and DSCR. Here’s a quick framework:
The deal is worth pursuing if cash flow is $200+ per unit, cash-on-cash return is above 8%, cap rate is competitive for your market, and DSCR is above 1.25.
The deal needs negotiation if the numbers are close but not quite there. Can you get the purchase price down 5-10%? Can you realistically push rent $50-$100/month? Small adjustments can turn a marginal deal into a good one.
Walk away if cash flow is negative or barely positive, DSCR is below 1.1, or the deal only works with aggressive assumptions you can’t verify.
Speed This Up Even More
Running these numbers by hand works, but it gets tedious when you’re evaluating multiple properties. The Deal Estimator on Underground Landlord lets you plug in purchase price, rent, and expenses and see all four metrics instantly. You can also compare multiple deals side by side if you’re deciding between properties — which is where the 15-minute analysis really pays off, because you can evaluate five deals in the time it used to take to evaluate one.
The deals you say no to matter as much as the ones you say yes to. A fast, reliable analysis process keeps you disciplined — and discipline is what separates investors who build wealth from investors who buy problems.