How do I know if a rental property is a good deal?

Every rental analysis, whatever the tool, is the same five steps: estimate the income, subtract the operating expenses, layer on the financing, compute the return metrics, and compare them to your standards. This article walks the whole chain with a live worked example. Edit any input below and watch every downstream number move.

The chain, in two formulas

Step 1: Income

Start from market rent, not the seller's number. Use comparable listings or a rent-comp tool, and be suspicious of a pro-forma that assumes a rent no neighbor achieves. Then haircut it for vacancy (5% is a common baseline; use your market's). Rent × 12 minus vacancy is your Effective Gross Income (EGI).

Step 2: Operating expenses

Itemize, don't guess: property taxes (public record, pull the actual bill), insurance (get a quote), repairs (commonly ~5% of EGI), and management (~8 to 10% of EGI, count it even if you self-manage). The 50% rule is a fine placeholder for this whole block, but replace it with real lines before you offer. EGI minus these operating costs is your NOI: the mortgage is not an operating expense, and neither is a capex reserve (commonly ~5% of EGI too). It's capital, not operations, so it sits below NOI, beside the mortgage payment, on the way to cash flow.

Step 3: Financing

Loan amount = price minus down payment; the monthly principal & interest comes from the standard amortization formula. Financing is where thin deals die at today's rates, which is why a screen that ignores it (like the 1% rule) can't make the decision.

Steps 4 & 5: Metrics, then verdict

Four numbers carry most of the weight: monthly cash flow (what's left after everything), cash-on-cash return (cash flow against the actual dollars you put in), cap rate (the unlevered yield), and DSCR (whether the property covers its own mortgage, lenders typically want ≥ 1.2). Then judge them against your thresholds, not someone else's. That is your buy box.

Work one now

Before you trust any result: stress it. Rate +1%, rent −$100, one extra vacancy month. A deal that survives all three is a deal.

Doing this at volume

One property, by hand, takes an evening the first time. The investors who find good deals screen dozens, which is the entire case for tooling. In BuyBox, a Quick Analysis runs this whole chain from an address in about 30 seconds, scores the result 0 to 100 against your buy box, and flags what fell short, and you can hover any number to see the formula and inputs behind it, exactly like the math lines above. Start with the free trial. Full analysis for 7 days: 3 Deep Dives and 10 Quick Analyses, no card.