How I Evaluate a Rental Property (The Exact Checklist I Use)

I own and manage rentals myself, and I use the same process for every deal, whether it's for me or a client. Here's how it works.

Step 1: Start with real rent, not hopeful rent

I pull leased comps (not just active listings) for similar homes nearby: same bed/bath count, similar size, similar condition. Asking rents are what landlords want. Leased rents are what tenants actually pay.

Step 2: Use Houston-specific expenses

National rules of thumb don't work here. I always check:

• Property taxes: look up the actual total rate, including MUD/PID. Budget on what taxes will likely be after the sale, since values often get reassessed.
• Insurance: get a real quote. Wind, hail, and flood exposure vary a lot by location.
• HOA: dues plus any rental restrictions in the deed restrictions.
• Vacancy: I usually budget 5–8% of rent.
• Repairs & maintenance: 5–10% of rent depending on age and condition, plus a separate reserve for big-ticket items (roof, HVAC, water heater).
• Management: 8–10% if you won't self-manage.

Step 3: Run the three numbers

1. Monthly cash flow = rent − all expenses − mortgage payment
2. Cap rate = annual net operating income ÷ purchase price
3. Cash-on-cash return = annual cash flow ÷ total cash invested (down payment + closing + rehab)

You can plug in your own numbers with the rental cash-flow calculator.

Step 4: Walk it like a rehab

I walk every property thinking about the next 5 years: roof age, HVAC age, foundation, plumbing type, drainage, and what tenants will be hard on. A "great deal" with a 20-year-old roof and original AC might not be one.

Step 5: Stress-test it

What happens if rent is 5% lower, the house sits vacant for two months, or taxes go up? If the deal only works when everything goes perfectly, I pass.

Want a second set of eyes?

Send me any address and I'll run the numbers with you. It's the same analysis I'd do before buying it myself.

This article is for education only and isn't financial or tax advice.