How to Analyze a Rental Property in 60 Seconds

Most new investors lose deals in one of two ways: they spend three weeks building a spreadsheet while someone else makes an offer, or they skip the math entirely and buy a property that eats $400 a month. The fix for both is the same — a fast, repeatable analysis you run on every property before you fall in love with it. Here are the four numbers that matter, and a real example of how they fit together.

The four numbers

1. Monthly cash flow

Rent minus everything: mortgage payment, taxes, insurance, plus the categories beginners skip — vacancy (~5-8% of rent), maintenance (~5-10%), capital expenditures, and property management even if you self-manage (your time isn't free, and you might not always self-manage).

2. Cap rate

Net operating income divided by purchase price. It ignores your financing, which is exactly why it's useful — it tells you what the property earns, independent of your loan. Compare it against other properties in the same market, not against a universal "good" number.

3. Cash-on-cash return

Annual pre-tax cash flow divided by the actual cash you put in (down payment, closing costs, initial repairs). This is the number that answers "was this a better use of my money than an index fund?"

4. DSCR

Net operating income divided by annual debt service. Lenders — especially DSCR lenders who qualify the property instead of your W-2 — usually want to see 1.2 or better. Below 1.0, the property doesn't cover its own mortgage.

A worked example

Say you're looking at a $240,000 duplex that rents for a combined $2,300/month:

Net operating income (excluding the mortgage) is about $18,500/year, so the cap rate is 7.7%. Your cash in is roughly $55,000 (down payment plus closing costs), and annual cash flow of ~$3,180 makes cash-on-cash 5.8%. DSCR comes out to about 1.21 — right at the line most lenders want. Verdict: workable, not spectacular; a small rent bump or price negotiation moves it meaningfully.

Where people get the inputs wrong

The math above took two minutes. The dangerous part is the inputs: investors routinely use the listing agent's "projected rent," guess at taxes, and forget that insurance on investment property costs more than on a primary residence. Pull rent from actual market data (HUD fair market rents are a sane floor), taxes from county records, and rates from current market pricing — not from hope.

That input problem is what TrueCap automates: type an address, and it fills market rent, property taxes, and current rates from HUD, FRED, and state data sources, then scores the deal 0-100 with all four numbers above. It's free, takes about 60 seconds, and you can override any assumption with your own numbers.

Frequently asked questions

What's a "good" cash-on-cash return?

Depends on your alternative uses of capital and the market's risk. Many buy-and-hold investors target 6-10% in today's rate environment — but a 4% CoC deal in a strongly appreciating market can beat a 9% deal in a declining one.

Should I analyze deals I know I won't buy?

Yes — reps build calibration. Analyzing 20 deals in your target zip code teaches you what normal looks like, so the genuinely good deal is obvious the day it lists.

Do these numbers work for house hacking?

Yes, with one change: run the numbers as if the unit you live in were rented at market rate. That tells you what the property becomes when you move out.