Every experienced real estate investor underwrites the same way: gather a handful of numbers, compute four ratios, run two sanity checks, decide. Most of them can do it in under a minute — without opening a spreadsheet. This post walks through exactly how, so you can do the same.
The goal isn't to make a final buy decision in 60 seconds. It's to triage: figure out which listings are worth a full underwrite versus which ones should be discarded on sight. Done well, the 60-second screen saves you 10+ hours a week of chasing dead-end deals.
The five numbers you need
Before you can underwrite anything, you need five inputs. Every one of them is either on the listing or one Google search away.
- Purchase price.The asking price. You'll later run scenarios against a negotiated price too, but start with what the seller wants.
- Monthly gross rent.If the property is occupied, this is the lease amount. If vacant, it's your estimated market rent — use HUD's Fair Market Rent for the county as a floor, then check Zillow and Rentometer for comps. Don't trust the seller's number alone.
- Operating expenses (annualized).Property tax, insurance, maintenance, management, vacancy reserve, HOA, owner- paid utilities, CapEx reserve. As a rule of thumb when you have no other data: 40-50% of gross rent for a residential rental. Underwriting against the “50% rule” is a fine starting point on a 60-second screen.
- Financing terms. Down payment percentage, interest rate, loan term. Use the current investment-property rate (typically 0.5-1.0 percentage points above owner-occupied), 25% down conventional, 30-year fixed. For cash purchases, skip this.
- Closing costs. 2-3% of purchase price is a reasonable estimate, including title, escrow, inspection, and minor cosmetic move-in costs.
Have those five? You're ready to compute the four metrics that actually matter.
Metric 1: The 1% rule (5 seconds)
The 1% rule is the fastest possible screen. Divide monthly gross rent by the purchase price; if it's 1% or higher, the deal probablycash-flows; if it's well below 1%, the deal probablydoesn't.
Example: $2,500/mo rent on a $250,000 property = 1.0%. Passes. $1,800/mo rent on a $300,000 property = 0.6%. Fails on its face.
Two caveats. First, the 1% rule is just a screen — failing it doesn't mean the deal is bad (high-appreciation markets often run 0.4-0.7% and still produce solid returns), and passing it doesn't mean the deal is good. Second, the rule was calibrated during 4-5% interest rate eras. With 30-year fixed rates above 6.5% in mid-2026, you arguably need more like the “1.25% rule.” Adjust your threshold to the rate environment.
Metric 2: Cap rate (15 seconds)
Cap rate (capitalization rate) measures the unleveraged annual return — what the property earns as a percentage of its price, ignoring financing. It's the single most-used commercial real estate metric.
What counts as a “good” cap rate is entirely market-dependent. In cash-flow markets like Cleveland, Indianapolis, or older multifamily in Sun Belt secondary cities, 6-10% is healthy. In appreciation markets like coastal California or NYC, 3-5% is the norm — the return assumption there is price growth, not cash flow.
The rule: your cap rate should comfortably exceed the risk-free rate.If 10-year Treasuries yield 4.5% and you're buying a property at a 4% cap, you're taking real-estate-level risk for less than Treasury return — that only makes sense if you believe in significant appreciation.
Metric 3: Cash-on-cash return (15 seconds)
Cap rate ignores financing, which is great for comparing properties but useless for your personal investment decision. Cash-on-cash return measures the return on the cash you actually invest, after the mortgage payment.
On a typical 25%-down conventional loan in 2026, an 8-10% CoC is very strong, 5-7% is acceptable in most markets, and below 5% you're probably looking at an appreciation play, not a cash-flow play. Negative CoC means you're feeding the property out of pocket every month — sometimes intentional (strong appreciation thesis), usually not.
Metric 4: DSCR (10 seconds)
Debt Service Coverage Ratio — the metric every lender pulls before approving a mortgage. DSCR is annual NOI divided by annual mortgage payments. It tells you (and your lender) whether the property can service its debt with operating income alone.
Most DSCR lenders won't fund anything below 1.0 — the property doesn't even cover its own mortgage. 1.0-1.2 is tight (small buffer, hard to get rate breaks). 1.2-1.5 is bankable. 1.5+ is strong, and you'll qualify for better rate tiers. If your DSCR on a 25%-down conventional pencils above 1.25, you have meaningful room to negotiate or absorb a rent dip.
The two sanity checks
Numbers can pencil and the deal can still be a trap. Two final checks before you call it.
Sanity check 1: Stress-test rent and vacancy
What happens to your DSCR and cash flow if rent comes in 10% below your estimate, or vacancy spikes from 5% to 10%? If a small miss on either input flips the deal from positive cash flow to negative, your margin of safety is too thin. Look for deals that still hold up after a -10% rent shock — those are the ones you can afford to be wrong about.
Sanity check 2: Compare to the 10-year Treasury
The 10-year Treasury yield is the closest thing real estate has to a risk-free benchmark. If your projected unleveraged return (cap rate) is below the Treasury yield, you're explicitly taking real- estate-level risk for sub-risk-free reward. That only makes sense if you have a strong appreciation thesis OR significant tax benefits you're harvesting (depreciation, 1031 exchange, opportunity zone). Otherwise, walk.
Putting it together
The 60-second workflow:
- Glance at the 1% rule — pass or fail.
- If it passes (or is borderline), compute cap rate. Compare to your market's typical range.
- Compute cash-on-cash at your expected financing. Decide if the return justifies the risk.
- Compute DSCR. Confirm it's above 1.2 — otherwise you can't get financed.
- Stress-test rent and vacancy. If a -10% rent shock kills the deal, walk.
- Compare your cap rate to the 10-year Treasury. If below, you need a thesis beyond cash flow.
Pass all six and the deal is worth a real underwrite — comping rent in person, pulling actual tax records, inspecting the property, modeling out a 10-year hold with tax strategy and exit scenarios. Fail any of them and you've just saved yourself a wasted weekend.
The shortcut:all four metrics + both sanity checks run automatically in TrueCap. Paste the address, and we auto-fill rent from HUD, mortgage rate from FRED, and property tax from your state's effective rate. You can run the 60-second screen on a real deal right now.
FAQ
Is 60 seconds enough to underwrite a rental property?
Sixty seconds is enough to triage a deal — to decide whether it's worth a full underwrite. It's NOT enough to buy. The 60-second pass tells you 'this is worth a deeper look' or 'pass.' Before making an offer you'll spend hours validating rent comps, inspecting the property, reviewing the actual operating statements, and stress-testing assumptions. The 60-second screen just keeps you from wasting those hours on deals that obviously don't pencil.
What's the difference between underwriting and analyzing a rental property?
In practice they're used interchangeably. 'Analysis' is more common among individual investors; 'underwriting' is the term lenders and institutional buyers use. Both describe the same workflow: gather the financial facts, compute the standard return metrics, decide if the projected return justifies the price and risk.
What's the most important metric — cap rate, cash-on-cash, or DSCR?
Depends what you care about. Cap rate measures the property as if you owned it free-and-clear — useful for comparing properties regardless of how they're financed. Cash-on-cash measures the return on the cash YOU specifically put in — useful for personal investment decisions and for comparing leveraged deals. DSCR is what lenders care about — it determines whether you can actually get financed. For a full underwrite, you need all three. For a 60-second screen, start with cap rate and the 1% rule.
What's a 'good' cap rate?
Market-dependent. In cash-flow markets (Midwest, Sun Belt secondary cities, older multifamily), 6-10% is healthy. In appreciation markets (Tier-1 coastal cities), you'll see 3-5% — the return assumption there is price growth, not cash flow. Anything below the prevailing 10-year Treasury yield (4-5% in mid-2026) is hard to justify without strong appreciation thesis.
Why use a calculator instead of a spreadsheet?
Spreadsheets break the first time you change a formula. They don't auto-fill market rent from HUD or pull live interest rates. They don't model tax savings from depreciation correctly. They don't stress-test your assumptions against ±10% rent or ±1 percentage point on rate. A purpose-built tool like TrueCap handles all of this without you having to remember formulas you only use once a quarter.
Should I underwrite a property before I tour it or after?
Before. The 60-second screen is specifically designed to gate which properties are worth your time. Touring a property takes 1-2 hours including drive time. If you tour every listing that catches your eye, you'll burn 10+ hours a week on dead-end deals. Run the 60-second pass first; only tour the ones that pass.