A rental can look good in a listing and still lose money after vacancy, repairs, capital expenses, and financing. The job of underwriting is to make every important assumption visible before the property becomes your problem.
Start with the actual cash going in
Separate the purchase price from the cash you will invest. Down payment, closing costs, immediate rehabilitation, inspections, and initial reserves all affect cash-on-cash return. Treating purchase price as cash invested makes leveraged deals impossible to compare.
For a $150,000 purchase with $30,000 down, $8,000 of rehab, and $3,500 of closing costs, initial cash invested is $41,500 before reserves. That number becomes the denominator for cash-on-cash return.
Build income and expenses on the same time period
Monthly rent and other monthly income should be compared with monthly debt service and monthly operating expenses. Annual taxes or insurance must be converted before they enter the model. Mixing monthly and annual values is one of the fastest ways to manufacture a fake return.
Include vacancy, repairs, capital expenditures, management, utilities paid by the owner, HOA, and a catch-all expense that is documented. A deal should survive realistic friction, not a perfect year.
- Verify market rent with comparable units, not the listing agent's projection.
- Price management even if you initially self-manage.
- Keep vacancy and capital expenses separate so the risk is visible.
Read the metrics together
Cash flow tells you what remains each month. Cash-on-cash return compares annual cash flow with the cash invested. Cap rate compares net operating income with purchase price without financing. DSCR measures how comfortably NOI covers debt service.
No single metric is a verdict. A high cap rate with thin DSCR may signal aggressive financing. Strong cash flow with unrealistic rent growth is still a weak analysis. PropLurk keeps the inputs next to the outputs so the decision can be challenged.
Stress-test the deal before making an offer
Re-run the analysis with lower rent, higher repairs, a longer vacancy, and a higher interest rate. If a small change flips the decision, the offer needs more margin or better evidence. The goal is not to predict the future perfectly; it is to understand which assumptions can hurt you.
PropLurk keeps assumptions and outputs together so you can test the downside before moving a deal into your pipeline.
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