Start with the operating statement, not the listing photo
A rental underwrite answers one question: after realistic income and costs, does this property produce the cash flow, yield, and lender coverage you need? Everything else — strategy, rehab, and market fit — hangs off that operating statement.
BrickAtlas Analyst keeps the math deterministic: cash flow, cap rate, cash-on-cash, and DSCR are computed in code. Use the same discipline on a napkin or spreadsheet before you fall in love with finishes.
- 01
Stabilize rent
Use market rent when current rent is above or below comps. Prefer lease-backed rent only when you trust the tenant and remaining term.
- 02
Haircut for vacancy
Apply a vacancy allowance even on “always rented” listings. Markets with longer days on market need a wider haircut.
- 03
List operating costs
Taxes, insurance, HOA or land rent, maintenance, and property management belong in NOI. Debt service stays out of NOI and goes into cash flow and DSCR.
- 04
Layer financing
Down payment, rate, term, and closing costs turn NOI into monthly cash flow, cash-on-cash, and DSCR — the metrics partners and lenders actually debate.
The metrics that decide a rental
Run the full set. Cap rate screens purchase yield before debt. Cash flow shows dollars left each month. Cash-on-cash shows return on cash invested. DSCR shows whether NOI covers the mortgage.
- Cap rate = NOI ÷ purchase price — useful for comparing assets before financing.
- Monthly cash flow = effective income − operating costs − debt service.
- Cash-on-cash = annual cash flow ÷ cash invested (down payment + closing + rehab you leave in).
- DSCR = annual NOI ÷ annual debt service — lender coverage, not investor lifestyle.
Condition and rehab still move the underwrite
Purchase-only metrics ignore work the property still needs. If you must renovate to hit market rent, underwrite all-in basis: purchase plus rehab, then recompute yield and cash left in the deal.
Photos, inspection risk, and after-repair rent assumptions are where deals quietly die. Treat condition as an input, not a footnote.
Market fit before max offer
A strong DSCR in the wrong metro is still the wrong next investment. Choose markets with rent-to-price, growth, and risk that match your persona — then underwrite addresses inside that buy box.
BrickAtlas starts earlier than paste-an-address tools: set a buy-and-hold persona, explore metros with Atlas Score and Match, find listings, then finish in Analyst with a strategy-aware Investment Memo.
Checklist before you write an offer
Use this gate before LOI or contract:
- Rent and vacancy assumptions are documented, not hopeful.
- Taxes and insurance are current-market, not last year’s estimate.
- Cash flow, CoC, and DSCR clear your persona targets after realistic rehab.
- Exit and hold horizon match the financing you can actually get.
- You can explain why this metro belongs on your shortlist.