When I underwrite a property, I’m trying to answer one simple question:

Does this deal generate cash flow?

It all starts with a quick screening. Before I dive into a full analysis, I like to run a reality check with a few simple filters.

The 1% Rule

This is a quick, back-of-the-napkin check:

Does the monthly rent equal at least 1% of the purchase price?

If so, that deal might be worth a closer look.
If not, it’s not automatically out but it flags the need for deeper analysis.

This rule isn’t perfect, but it saves time by helping you eliminate deals that are unlikely to cash flow, especially early in your search.

Example:
If a property is listed for $200,000, the 1% rule says you want monthly rent of at least $2,000.
If it only rents for $1,400, that might be difficult unless there’s a clear value-add play.

Cash Flow First

Once a deal passes the quick screen, I plug it into my deal analyzer. That includes real numbers for:

  • Down payment and interest rate
  • Taxes and insurance
  • Operating expenses
  • Management (whether you use a PM or self-manage)
  • Reserves for repairs and maintenance

If the deal produces positive monthly cash flow even with conservative estimates, you’re on the right track.

Speculating on appreciation is not a strategy. The property should pay you from day one or at least have a clear path to cash flow.

Look for Value-Add Potential

A solid deal on day one is great. But I also want to know:

Can I improve this property and boost its performance over time?

Some of the most common value-add strategies include:

  • Cosmetic updates (paint, lighting, landscaping)
  • Upgrading appliances or finishes
  • Improving curb appeal to reduce vacancy
  • Adding smart home features

And don’t overlook new income streams:

  • Pet rent
  • Laundry income
  • Storage fees
  • Parking or garage rentals

None of these have to break the bank, but together, they can multiply your Net Operating Income (NOI) and boost your overall return.

Be Smart About Older Properties

If a property was built decades ago, I pay extra attention during underwriting and even more during due diligence:

  • A sewer scope is often worth the small investment
  • Watch for drainage issues or foundation movement
  • Check if electrical, plumbing, or HVAC systems are original or recently replaced

I’ve bought and loved older properties, but they come with added diligence and potential expenses. Your analysis should reflect real maintenance timelines and upgrade needs.

Don’t Forget Flood Zones

One of the easiest underwriting steps investors skip?

Checking flood maps.

Flood zones can dramatically increase insurance costs, and some lenders require flood insurance as a loan condition.
Take five minutes to check FEMA or local GIS maps before going too deep.

Run Sensitivity Scenarios

Once I’ve got the base numbers locked in, I like to stress test the deal:

  • What happens if rents drop by $100?
  • What if rates go up before I lock in financing?
  • What does my cash flow look like after accounting for higher property taxes?
  • What if I self-manage instead of hiring a property manager?

A good deal analyzer should let you flex assumptions and see how things hold up across multiple scenarios. This doesn’t just build confidence; it helps you avoid surprises.

Final Takeaways

  • Use simple filters like the 1% Rule to save time
  • Prioritize cash flow over speculative appreciation or tax perks
  • Look for light value-add opportunities to improve performance
  • Be extra thorough with older properties
  • Always check for flood risk early in the process
  • Use a flexible model to test your assumptions