6 Numbers You Need to Know Before Buying a Rental Property

What It Covers

Dave Meyer and Henry Washington break down the six numbers every rental property investor must calculate before buying: current value, equity, after repair value, rent comps, holding costs, and cash flow. Together these metrics replace gut-feel speculation with a repeatable math-based framework for evaluating any deal.

Key Questions Answered

• •Current Value vs. List Price: Never use list price as a proxy for property value — they are unrelated figures. Get a licensed appraiser or a real estate agent to run comparable sales based on matching finish quality and condition. In a flat or declining market, buying below current value creates a protective cushion against further price drops.
• •Walking Into Equity: Buying a property at $50,000 below market value means you gain $50,000 in equity on day one, before any down payment. Any cash you put down adds on top of that. This "day-one equity" strategy, combined with renovation-driven forced appreciation, is the primary mechanism for building long-term real estate wealth.
• •Conservative ARV Calculation: When estimating after repair value, always ask agents for the middle-to-low end of the comparable sales range, never the ceiling. Markets shift seasonally, and assuming top-of-range comps can flip a profitable flip into a loss. Budget for the realistic scenario, not the best-case outcome, to preserve deal profitability.
• •Rent Comps with Built-In Discount: Take whatever rent figure a property manager or agent provides and underwrite to the lower end of the range. Prioritize immediate leasability over maximum rent — a qualified tenant at $1,400 today outperforms a two-month vacancy chasing $1,600. Also factor local vacancy rates; doubling the market average of ~5% provides a realistic buffer.
• •Holding Costs Landlords Miss: Beyond mortgage, taxes, and insurance, landlords must budget monthly reserves for maintenance, capital expenditures like HVAC and roof replacement, turnover costs, vacancy at roughly 8% for single-family, and property management at ~10% of rent. Excluding these converts gross revenue into a false cash flow figure and erases profitability when expenses inevitably arrive.