How TrueCap's screening bands classify a deal

Why we show screening bands

A rental analysis spits out numbers — cap rate, cash flow, DSCR, cash-on-cash, IRR — and a new investor stares at them wondering if 6.5% is good. An experienced investor may recognize common rules of thumb (DSCR ≥ 1.25, cap rate ≥ 7% in some contexts) but still needs the assumptions and target basis stated explicitly.

The screening classifier groups the modeled outputs into one of five bands and explains which thresholds were met or missed. Buy Box fit is a separate check of the modeled numbers against your own targets, and the Deal score (0–100) is a heuristic summary of the modeled numbers.

The classifier's thresholds live in one file, lib/verdict.ts, in the codebase that powers this site. This post explains them with the same numbers the production code uses.

The five tiers, in one sentence each

• Strong — clears every legacy band threshold. This label does not direct the user to buy or offer.
• Solid — clears the lower legacy band thresholds with less modeled margin.
• Mixed — one or more metrics do not clear the higher bands; review the actual targets and assumptions.
• Marginal — cash flow is negative or model DSCR is below 1.0 within the stated range.
• Negative — cash flow is meaningfully negative or model DSCR is well below 1.0 under the entered assumptions.

The exact thresholds (financed purchase)

Most rental purchases use financing, so this is the primary legacy path. The classifier checks three metrics (cash flow, DSCR, and cash-on-cash) and assigns the first matching screening band.

Strong

All three must hold:

• Monthly net cash flow ≥ $400
• DSCR ≥ 1.25
• Cash-on-cash ≥ 10%

These are TrueCap score-band heuristics. A $400 monthly scenario creates more modeled room than $100, but it does not guarantee coverage of a vacancy or capital event. A 1.25 modeled DSCR does not establish lender DSCR, eligibility, pricing, or approval. Compare the modeled CoC with current, like-for-like alternatives using the same horizon, liquidity, risk, taxes, and transaction costs.

Solid

All three must hold:

• Monthly net cash flow ≥ $100
• DSCR ≥ 1.15
• Cash-on-cash ≥ 6%

The Solid band has limited modeled margin. A $100/month cash flow buffer disappears the moment vacancy ticks up or a major appliance breaks. 1.15 DSCR is above breakeven but leaves limited modeled coverage. It does not show whether a lender would accept its own calculated ratio or whether more equity changes eligibility. The 6% CoC band is an internal classification, not a required return or market comparison.

Mixed

Anything that doesn't hit Strong or Solid but still has positive cash flow and DSCR ≥ 1.0 lands here. Cash flow is positive but maybe only by a few dollars. DSCR clears breakeven but tightly. CoC may be modest. The output is sensitive to the assumptions and should not be read as a directive.

Marginal

• Monthly cash flow is negative but not worse than -$200, or
• DSCR drops between 0.9 and 1.0

Marginal means the entered case misses a cash-flow or coverage threshold. A different result requires evidence for a changed assumption—for example, a documented rent or financing term—not optimism about a future value.

Negative

• Monthly cash flow worse than -$200, or
• DSCR below 0.9

Negative means the entered assumptions do not produce a positive operating case. Price, rent, expenses, or financing would have to change for the modeled cash-flow result to change; any replacement value should be supported by evidence.

The cash-purchase path

When the analysis says monthlyPayment <= 0 — i.e., there's no financing — DSCR doesn't mean anything. There's no debt service to cover. The screening classifier detects this and switches to a simpler classifier:

• Strong: cash flow ≥ $400/mo, cap rate ≥ 7%, CoC ≥ 8%.
• Solid: cash flow ≥ $100/mo, cap rate ≥ 5%, CoC ≥ 5%.
• Mixed: positive cash flow but below Solid thresholds.
• Marginal / Negative: same negative cash flow cutoffs as financed (-$200 boundary).

CoC thresholds are slightly lower than the financed path because cash purchases are giving up leverage — the "same" 8% CoC on cash represents a higher risk-adjusted return than 8% CoC on a financed deal, because there's no debt-service risk.

How the screening bands group each metric

The legacy classifier groups each metric into a band. The current underwriting result keeps these labels secondary to the actual numbers and the user's selected targets.

Cap rate sentences

• ≥ 7% — legacy upper cap-rate band.
• 5-7% — legacy middle cap-rate band.
• 3-5% — legacy lower cap-rate band.
• < 3% — below the legacy cap-rate bands; verify rent and operating expenses.

DSCR sentences

• Cash purchase — "DSCR: N/A — no debt service. An all-cash purchase has no lender debt service to cover."
• ≥ 1.25 — "above the 1.25 screening benchmark; actual lender definitions and requirements vary."
• 1.0 - 1.25 — "above modeled debt-service breakeven but below the 1.25 screening benchmark; confirm the lender's definition and requirements."
• < 1.0 — "below 1.0 — operating income doesn't cover debt service, so the owner subsidizes the property each month."

Cash-on-cash sentences

• ≥ 12% — legacy upper CoC band.
• 8 - 12% — legacy high CoC band.
• 4 - 8% — legacy middle CoC band.
• 0 - 4% — legacy lower positive CoC band.
• < 0% — negative modeled cash return.

What the screening classification doesn't do

These are deliberate scope decisions:

• No appreciation modeling. The classification is operations-only and does not predict future value. The Deal score's 10-year total-return factor is where TrueCap accounts for modeled appreciation.
• No subjective "location quality" score. Some tools combine financial output with a neighborhood-vibes rating. We don't — location quality is what you know about the market, not what an algorithm tells you.
• No partial credit. Strong requires all three thresholds. Missing any one knocks you out of Strong, into Solid only if all three Solid thresholds still hold, otherwise lower. We thought about a weighted score (that's what the Deal score does), while this classifier uses explicit cutoffs.

How to use the screening bands

When you run a property through the TrueCap analyzer, start with the core economics and any Buy Box fit. Treat a legacy band as secondary context:

1. Strong: the entered case clears every band threshold. Verify rent, tax, insurance, condition, financing, and the targets that matter to you before recording a decision.
2. Solid: the entered case clears the lower band thresholds with less margin. Stress-test rent and vacancy, then compare the result with your own explicit targets.
3. Mixed: one or more metrics miss the higher bands. Review the modeled result directly instead of treating the label as a conclusion.
4. Marginal / Negative: the entered case misses a cash-flow or coverage threshold. Change assumptions only when you have evidence for the replacement value.

If you want the math behind the classification

The underlying calculations come from lib/calc-analysis.ts — the single source of truth for cap rate, cash-on-cash, DSCR, and monthly cash flow across the entire site. Same engine drives the free analyzer, the saved-deal PDF, the share link, the dashboard, and the OG image. If you've seen the number 6.4% as the cap rate in your TrueCap analysis, that's the same 6.4% the screening classifier reads.

For deeper reading on the individual metrics, our guides on cap rate vs cash-on-cash vs DSCR and what is a good cap rate go into the "what number is good?" question one metric at a time.