How to Analyze a Rental Property Step-by-Step (15 Years of Experience)

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2:34They've partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit biggerpockets.com slash retirement to learn more. This is how to analyze a rental property in 2026. If you want to build wealth with real estate, analyzing deals is the most important skill to master. If you can find a great property and buy it at the right price, everything else becomes easier. And if you can't, that's when you risk losing money. Fortunately, analyzing deals does not need to be difficult. You just need to know which metrics actually matter and how to estimate a few key variables.

3:12So today I'm walking you through it step by step. This is how to take any listing from Zillow or Redfin and determine if it's a property you should buy. I'll share which metrics I personally care about most, explain how to estimate rents, expenses, and after repair values, and reveal which numbers you can compromise on and which you absolutely cannot. I've personally been using this exact process every single day for the last 15 years as I've built my own rental property portfolio. And even in today's market, you can do this too. You can find cash flowing properties that will bring you closer to financial freedom.

3:51if you run the numbers the right way. This is how you do it.

4:00What's up, everyone? I'm Dave Meyer, Chief Investment Officer at BiggerPockets. Today, I'm taking you through my deal analysis framework because being successful in real estate investing mostly comes down to one really simple thing, finding the right deals and buying them at the right price. And I'm actually going to do this. I'm going to explain it to you by just doing a deal analysis. I went on Zillow. I found an on-market deal. And we're going to walk through it and analyze it. Then at the end, we will get to the metrics and which ones you should pay attention to. But because the calculations of those metrics are pretty easy, we're using the BiggerPockets calculator if we just put the right assumptions into that, all the metrics that you need to you know, like cash on cash return, return on equity, those other things, they're all going to be spit out for us at the end accurately.

4:52And I'll talk through how to interpret those at the end of the episode. But we're going to just start now with doing this deal analysis. So the deal that I found and that we're going to walk through together is a duplex. As you probably know, I'm a big fan of small multifamily. I love two to four units. I'm usually looking for duplexes or something similar. And I found one in a market I actually have heard a lot about, never been there, but Augusta, Georgia, home of the Masters Golf Tournament. It is a great market on paper, has really strong fundamentals. So I just started looking around Zillow, looking for on-market deals.

5:29And I found one that looks really intriguing, but we're gonna find out together if this is a deal that you should buy or not. So the deal we got, if you're watching on YouTube, I'll pull it up, but if you're listening to it, It's listed, I'll say, for$275 ,000. It's a duplex. It's pretty nice looking, not architecturally inspiring, but it's kind of just a giant box. But it looks pretty nice from the outside, pretty solid. It's 1 ,780 square feet. So each of the units are two bed, one bath, and it's an up-down duplex, which I like. Personally, I really like deals where it's what's called like a purpose-built duplex, meaning that instead of a house being cut up into like a single family home being cut up into two units, this building was designed to be a duplex.

6:19I just, in my experience, that leads to less and less expensive maintenance problems. I still have and buy other types of homes, but I do like these. All things being equal, I prefer a purpose-built duplex. This one's good. Of the things I liked about it, one, purpose-built, It looks like it's in solid shape from the outside. And I really like that it was built in 1984. That already tells me that the plumbing, the electrical, probably in decent shape, even if it's not perfect, it's going to be much better than some homes that you buy in the Midwest that are like built in the 1920s or even earlier.

6:55And when I look through the pictures, what I see is I think someone may have flipped this recently. And I know people have, you know, red flags going off like, oh my God, I can't possibly buy a flipped house, but let's just see if the numbers work, right? The reason I say it's flipped is it's really nicely painted on the inside. There's new floors. It looks like vinyl plank. It looks like there's new doors. The kitchens look brand new. So this place is in really good shape. So already as I'm doing, you know, this preliminary research about my analysis before I start putting numbers into the calculator, I'm starting to just get a sense of what condition the property is in.

7:34Because when we get to the point where we're putting these numbers in the calculator, we're going to have to say how much for repairs, how much for capital expenses, right? How much vacancy is there going to be? And all of those things are influenced by the condition of the property. If it's in good shape, your capital expenditures are probably not going to be that much, right? If someone just replaced the HVAC or just replaced the roof, you don't have to count on spending money on that for 10 years or maybe even longer. Additionally, if the property is in good shape and if it's in a good condition, you can get a higher end of the rental range because one of the key inputs we're going to put into our deal analysis and into our calculator is rents.

8:17And a lot of times, whether using the BiggerPockets Rent Estimator, a similar tool, talking to an agent, talking to a property manager, they're going to give you a range for rents. They're going to say, this place will rent for$900 to$1 ,200. That's a pretty big difference, right? 900 to 1200 is the difference between a deal cash flowing and you losing money. So you gotta narrow down that focus. And by looking at, even if it's just pictures, if you're not yet seeing the property in person, you can start to understand that range. So overall, I think it's a really nice looking property. I think I would have an easy time renting this out and I'm not counting on super high expenses and I am sort of counting on higher end rent range in the area.

8:59One more thing I'm going to look at before I move on to my calculator is just looking through the listing description to see what capital expenditures and improvements have been done. This is what I really liked about this listing when I saw it. This line right here said major capital improvements were completed in 2021, so only five years ago, including a new roof. I love that. Roofs can cost$10 ,000,$20 ,000,$30 ,000, and they last usually on average 30 years. And so the fact that that's only a five-year-old roof, that's a major plus. New HVAC system, that's huge, super big expense. Windows are so expensive.

9:36They are so expensive. Those were replaced. Vinyl siding, that stuff is bulletproof. That will last forever. Water heaters and exterior doors. So in my head, as I'm just doing this preliminary screening before I jump into the calculator, I'm already seeing that this place is in good shape, and I'm not gonna have to come out of pocket a lot on top of my down payment. The flip side to this, which we'll talk about a little bit is there's not that much value add opportunity, but we'll get to that in a minute. So that's really all you need to do before you start jumping into the calculator. And so what I'm gonna do is move over here.

10:10If you're watching on YouTube, I'm gonna move to the BiggerPockets calculator, but don't worry if you're listening, I will describe. But if you wanna do this and follow along, you can go to biggerpockets.com slash calculators and try these out for yourself. So there's basically five steps to working through the calculator. It's number one, putting in the property information. That can be simpler. Number two is purchase details, like what you're buying it for. Number three is financing, what kind of mortgage or loan that you're using. Number four is your rents. And number five is expenses. So we're just going to walk through each of those five things.

10:45Again, the property information is literally, you know, just kind of like writing down what property it is. I just put in the address, which is in Augusta, Georgia right now. I'm putting that property information in. Calculators will also pull in like some tax information for you. So that's why you put in the address. Next up, purchase details. So this is what you're buying it for. So I'm going to put in$275 ,000. That's what it's listed for. Now, talk about this a little bit later. We might want to offer under listing price, probably will, but I'm just for now going to put in the listing price, which is$275 ,000.

11:22The purchase closing cost is the next thing we need to do, which for a property like this, I would estimate about$5 ,000. You can use that, I think, as a rule of thumb, depending on where you live. But a property this price in Georgia, probably about five grand. If you're buying a more expensive property in a more expensive area, I would use a rule of thumb of like maybe 7 ,500 bucks. Best way to do this, talk to a lender, talk to an agent about purchase costs in your area, that's the best way to get any good input. The next thing you need to put in for the purchase details is whether or not you're rehabbing the property.

11:56Because if you're doing something like the BRRRR method, or if you're buying something that's a little bit rundown and you want to improve the quality of it, you need to account for that in your deal analysis. This is super important because it's such a valuable, important part of generating a return on a deal, especially today. Now I did some research into this property. I haven't done the full analysis, but I was just kind of looking into it. Like, is there any way to add value to this property? Because I like it, but it's in good condition. So that's like, it's not a bad thing, but I like adding value where I can.

12:28And actually what I figured out was this does not have a garage and I could build a garage in this property for about 10 grand. And I think it would add about$25 ,000 of value. I figured this out. I estimated my ARV, which is the after repair value, what the property is going to be worth after you make these upgrades by looking at comps. So I went on Zillow. I went on Redfin and found similar kinds of properties that have sold in the last six months. And I tried to figure out the difference between what properties that had a garage versus properties that didn't have a garage were selling for. And my estimation is roughly $25 ,000.

13:08So it's valuable to people in this market. If you are going to do your own value add project, this is, I think, probably the hardest assumption that you're going to have to do. So if you're going to buy a property that you're going to renovate, put new floors in, put new paint on the wall, maybe move walls if you're going to do something more ambitious, figuring out what that property is going to be worth after you do that renovation is a skill and it takes some work. So I encourage you to try and learn how to do this yourself. But this is also where your agent comes in. This is where your agent should, if they're a good investor-friendly agent, they should be able to tell you this.

13:46You go to them and say, I like this property. What do you think would increase the ARV? Or I'm gonna buy this property and I'm gonna renovate the kitchen in both sides of this duplex. What do you think the ARV is there? That's what you should be relying on your agent for. You wanna get good at it yourself so you can gut check it because ultimately every decision comes down to you as an investor. but they should be helping you a lot with this. And if you don't have a good investor-friendly agent, you can get one for free, BiggerPockets, go to biggerpockets.com slash agents, tons of investor-friendly agents there.

14:17But make sure you get this ARV down, right? You wanna be accurate on this one. It's off by five grand here or there, that's okay, but you don't wanna take a big swing and miss. Like if I were to buy this property and say, I'm gonna install a garage and that's gonna take my value from 275 to 350, no, that is not good. That's gonna throw off all of my calculations. I wanna be accurate and I don't wanna be overly optimistic. I kinda wanna be conservative. And so once you've figured that out, and again, this takes some repetition and reliance on your agent and working with your agent, but I'm gonna put in my after repair value into the calculator as 300 ,000 and my repair costs as 10 ,000 because that's what I think it will cost.

14:55So the last thing you can do here before moving on from purchase details is adjust the property value growth, basically the rate of appreciation that you expect for this property. Now, you might know this, but over time, property values go up in the United States. The long-term average is like 3.5%. But I personally recommend, and what I do for my own deals, is do something lower. I actually put in 2%. And the reason that I do that is because my focus, what I'm doing in this deal analysis, is does this deal make sense for me today? I need to make sure that the cash flow is good today. I need to make sure that the return on equity is good today.

15:32and sure, I'd love appreciation, but I don't want that to be the driver of whether or not this deal makes sense for me. And so I purposely set this expectation low and that way, if it still works based on low conservative estimates, any appreciation that I get in the future is just a bonus. And that's how I do it. It's how I recommend most investors do it, but it's sort of up to you. If you wanna put it at three, four, 5%, you can do that. If you want to be even more conservative, you can put it at zero. It's probably unlikely, but you can do that as well. So now we've done our first two steps of deal analysis, which are property information and purchase details.

16:11Next, we're going to move on to financing and putting in your loan assumptions, but we got to take a quick break. We'll be right back.

16:21Welcome back to the BiggerPockets podcast. I'm Dave Meyer, talking through how to analyze a rental property in 2026. Before the break, we got through two of our five steps. Step one was property information. That was literally just copy and pasting. Step two was purchase details, where we put in our purchase price, our closing costs, our repair costs, and our after repair value. Now we're moving on to our financing details, which is basically the kind of loan that you're gonna use, or maybe you're buying it for cash, but I'm gonna assume most people listening to this are gonna be buying things with a mortgage.

16:56So you come down here on the calculator for everyone watching on YouTube. But for those listening, basically what we need to put in here is one, what down payment you're going to put down in terms of percentage, the interest rate that you are using, the loan term. So are you doing a 30-year fixed? Are you doing a 15-year fixed? Are you doing an adjustable rate mortgage? And then lastly, whether you're paying any points, which I'll explain in a second. So first things first, down payment. If you are an investor, the typical down payment, this is common misconception, is not 20%. It is 25%. Most lenders require 25 % down on investment property.

17:35So I'm going to use that for our analysis today. You might be able to find local lenders that do 20%. That's absolutely exists. The big ones usually ask for 25%. The other exception is if you're doing a house hack, you can put as little as three and a half percent down. If you're doing an FHA loan, there's even some private loans that do three and a half percent down. You put 10 % down. So if you were doing owner occupied, like a house hack, you have a lot more options here. But for me, what I pay on my loans when I go out there is 25%. So that's what I'm going to put in here. That makes my down payment$68 ,750.

18:07And then I'm going to put in my interest rate. This obviously varies day to day, especially right now. But as of right now, I looked it up this morning. The average interest rate is about six and a half half percent. For investors, you're usually paying a little bit more. So I'm going to put 6.8 % for my interest rate here because when you go out and you just Google like interest rate, it's usually for a home buyer. Those folks get lower mortgage rates because they're often backed by the government or for a lot of different reasons. But 6.8 % is what I'm going to do. And I love a 30-year fixed rate mortgage.

18:39So I'm doing that 30-year fixed rate mortgage. This is one of the things you want to be accurate about. If you put in 6.2 % here and it's actually 6.9%, that can make a big difference in a deal. Maybe not one at this price point, but if you're at a deal that's 500 grand or 600 grand, that's hundreds of dollars a month. And so you really want to know what your mortgage rate's going to be. Luckily, this is super easy and free. Call a lender. Establish a relationship with a lender. That is the easiest way to get the right inputs and the right assumptions for this part of your deal analysis. It's also where you will get information, one, about closing costs, and you'll also get information about the last question here on the financing details, which is points charged.

19:24Now, points are just kind of like extra fees that are added on to a mortgage, and you might pay them because you're putting less than 20 % down. That is a very common reason you pay points, because the lender is taking on more risk by getting a lower down payment, And so they need to be compensated for that additional risk. And they do that through points. You also have the option to voluntarily pay points. And I know most people aren't voluntarily giving banks their money, but often why people do this is you can buy down your mortgage rate. So if you want to do that, you can say, I'm going to pay five grand at the beginning of the mortgage, and I'm going to buy my rate down from 6.8 % to 6%.

20:02I'm making those numbers up. But that is something that you can do. Generally, it's a good idea if you expect to hold onto a property for more than eight, nine years, but that's a decision that you have to make. Best way to know how to do that, talk to a lender. So if you talk to a lender, you're going to have a very easy time getting the inputs for the calculator here. And that's what we're talking about. How do you get good inputs and put into this calculator? For this one, talk to a lender. If you need one, go to biggerpockets.com slash lender and you can get matched with one. We also, if you are a pro member, have discounts on loans through some of the biggest providers in the country.

20:39You can get literally thousands of dollars off your closing costs. You can get better interest rates. So go to biggerpockets.com slash pro and you can check out those perks if you are a pro member. Just buying one deal, by the way, and getting those benefits on your loan is worth the price of BiggerPockets Pro. So definitely check that out. All right. We've done three of the five steps. We've done property info. We've done purchase details. We've done financing details. So as we are flying through this thing, I'm going slowly because I'm talking about this a lot, but hopefully you can see that if you practice this, you should be able to do this really quickly because honestly, like financing details, not gonna change that much from deal to deal.

21:15So if you're looking at 10 duplexes in a week, your interest rate, your loan term, your points charged probably gonna be the same. So you can start to get faster and faster at these things. The next one we're moving on to is rent. This one is super important because if you look at most deals, Right now, in today's market, the cash flow is decent. Some of them are thin, some of them don't cash flow. But a difference here or there in$100 a month in rent,$200 a month in rent really does matter. And so you want to get this one as close as possible. There are actually three ways that I look for rents before I plug them into the calculator.

21:54Number one is using an algorithm or an automated tool. Like we have one, the rent estimator on BiggerPockets. There are other good ones out there on the market, but you plug in your address, you tell them how many bedrooms, how many bathrooms, and it basically uses an algorithm. It's kind of like a Zestimate for rent and tells you what you think rents are. A lot of times it will give you a range. So you want to make sure you know where in that range you fall. So in this property, when I look this up, I saw that the range was like$1 ,000 to$1 ,400. That's a pretty big difference, right? So I need to know where in that range I fall.

22:30And that's why I was looking at the pictures and looking at their location so much because I wanted to understand, is this a good location? Are we going to have a lot of demand from tenants? And how nice is it compared to other properties in the area? And what I am going to do is peg this at the 75th percentile. Now, I never go to 100th percentile, ever. Even if I know I have the best property on the block, I do not put 100th percentile because I do not. Again, I like to be conservative with these things. I do not want to assume I'm going to get the best rent in the neighborhood. Who knows what happens when you go on rent?

23:05Maybe it's a bad season. Maybe it's snowing that month. Maybe there's a hurricane. Who knows? So I like to discount it, but I will go up to the 75th percentile. So for me, when I do this and I see$1 ,000 to$1 ,400, the 75th percentile is$1 ,300. So that is my initial assessment. But I won't just rely on the algorithm. I'll actually take two additional steps. Next step is I will just go on Zillow and apartments.com or whatever you use in your local market and just check out what rents are in the area. And look at comps. Like if I see there are a bunch of apartments that are similar in quality, similar in location, and they're all listed for 1150 red flag, right?

23:48They know something I don't, or tenants are going to go rent there because it's a comparable property. That's$150 less. Like that's why you can't just rely on the algorithm. You need to go out there and see what your competition is. And that's what, it's super easily done. It takes 10 minutes to go do this on Zillow and apartments.com. But make sure you are looking at a comparable property in terms of amenities and finishes and in a comparable location. The third, and perhaps the best way to do this, is to actually just talk to a property manager. So if I'm looking and analyzing a deal in a market that I already invest in, I'll just call my property manager and say, hey, you rent out dozens or hundreds of properties, what's this going to rent for?