ANALYSIS

How to Analyze a Rental Property in 5 Minutes

Updated March 2026

Check 1: The 1% Test (10 seconds)

Monthly rent divided by purchase price. Is it at least 0.8%? If a \$200K property rents for \$1,600/month, that's 0.8% — borderline. Below 0.7%? Skip it unless you have a specific value-add thesis. Above 1%? Worth a deeper look.

Check 2: The PITI+ Quick Math (2 minutes)

Estimate your monthly PITI (use an online mortgage calculator), then add 30% of gross rent for operating expenses (taxes, insurance, maintenance, management, vacancy). Is the total less than rent? On a \$200K property at \$1,600/month: PITI roughly \$1,050 plus \$480 in operating expenses = \$1,530. Cash flow: \$70/month. Thin but positive.

Check 3: Cap Rate Gut Check (1 minute)

Is the cap rate at or above the market average? If your market averages 7% and this property calculates to 5%, it's either overpriced or you're missing income. If it's at 9%, it's either a great deal or there's a problem you haven't found yet (deferred maintenance, bad neighborhood, problematic tenant).

Check 4: The Dealbreaker Scan (2 minutes)

Check the listing for red flags: foundation issues mentioned, old roof, galvanized or polybutylene plumbing, environmental concerns, flood zone, HOA restrictions on renting, and the age of the major systems. Any one of these doesn't kill a deal, but multiple together mean expensive surprises. If the property passes all four checks, it's worth a full analysis with real numbers.