Rental Underwriting
Underwriting is the heart of every deal: turn a listing into cap rate, cash-on-cash, DSCR, and monthly cash flow, then decide. These guides walk the metrics and the pro forma; the calculators run the math.
Guides
How to screen a rental property in 60 seconds
A fast rental screen: organize five inputs, review four modeled metrics, and see what still needs checking before a full underwrite.
9 min readWhat is a good cap rate? A property-specific framework
There is no universal good cap rate. What the ratio measures, how to compare consistent inputs, and which property-specific evidence to check first.
9 min readCap rate vs cash-on-cash vs DSCR: which one actually matters?
Three metrics, three different jobs: a plain-English guide to what cap rate, cash-on-cash and DSCR each measure, when each one matters, and how negative leverage shows up when you compare them.
8 min readCash-on-cash vs IRR: which one tells the truth?
Cash-on-cash and IRR are both return metrics, but they answer different questions: when each one is the right lens, when each one misleads, and how to use them together.
7 min readHow to calculate NOI (net operating income) on a rental property — 2026 guide
NOI = effective gross income minus operating expenses, before the mortgage — and it's the number cap rate, DSCR, and 5+ unit valuation are all built on. The formula, a full line-by-line $250K duplex example, the CapEx classification trap that swings the cap rate a full point, and the three ways people get NOI wrong.
10 min readGross rent multiplier (GRM) explained: how to screen rentals fast (2026)
GRM = price ÷ annual gross rent, a quick rental screen. The formula, a three-listing screen, the cap-rate bridge ((1 − expense ratio) ÷ GRM), how it maps to the 1% rule, and two $250K duplexes with identical GRMs that cash-flow +$365 and −$155 a month.
10 min readHow to read a rental property pro forma (and verify its assumptions)
A pro forma is a seller's projection, not a result. How to turn one into numbers you can verify: rent, vacancy, insurance, taxes, maintenance, reserves, management and bad debt.
9 min readHow to spot a bad rental deal in 60 seconds — 7 red flags
Seven red flags that tell you a rental may not pencil, checked before you spend hours on a full underwrite.
8 min readThe 50% rule for rentals — is it still useful in 2026?
The classic 50% rule says operating expenses run about half of gross rent. When it works as a triage tool, when it misleads, and what to use instead.
6 min readVacancy rate for rentals: what to assume in 2026 (and why 5% is usually a guess)
Physical vs economic vacancy, the turnover math that derives the number instead of guessing it, what 5 points of vacancy does to cash flow and DSCR, and why a DSCR lender's formula may treat vacancy differently from your underwrite.
10 min readCapEx and maintenance reserves: how much to actually budget for a rental (2026)
Percent-of-rent defaults can understate capex on cheaper properties. The component-lifespan method with illustrative replacement costs, an age-weighted reserve formula, and what realistic reserves do to NOI, DSCR and cash flow on a $220K rental.
10 min readRental property insurance: coverage, quotes, and underwriting
How to collect property-specific landlord-insurance evidence: landlord (DP-3) versus homeowners coverage, what loss-of-rent coverage protects, the exclusions to compare, and how a $1,500-versus-$3,500 premium cuts cash flow by about $167 a month and moves DSCR.
11 min readThe 1% rule for rental property: does it still work in 2026?
The 1% rule says monthly rent should be at least 1% of the price. The GRM bridge (a 1% deal is a GRM of about 8.3), how higher mortgage rates raise the break-even rent-to-price in this article's example (about 0.57% at a 3.5% loan, 0.76% at 7%), two 1% properties whose returns sit 40% apart, and what the rule hides.
10 min readBreak-even occupancy: how much vacancy a rental can survive (2026)
Cap rate tells you what a rental earns; break-even occupancy tells you how much can go wrong before it stops covering its bills. The formula — (operating expenses + debt service) ÷ gross potential rent — a worked duplex where an 86% break-even leaves a 14-point cushion, an overpaid twin that leaves far less, and why break-even occupancy is the occupancy where DSCR hits 1.0.
10 min readOperating expense ratio (OER): what's a good one for a rental? (2026)
OER = operating expenses ÷ effective gross income, the ratio behind NOI and cap rate. The formula, the four costs that aren't operating expenses (mortgage, depreciation, CapEx, income tax), and a line-by-line duplex that runs 40% before reserves and 46% after, reconciled to the 50% rule.
11 min readReturn on equity (ROE) on a rental property: the lazy-equity test (2026)
Cash-on-cash tracks your original down payment forever; return on equity tracks what the equity you hold today is actually earning — and on a rental you've owned a while, only the second one drives decisions. The formula, a 10-year example where the dollar return nearly doubles while ROE slips from 16.9% to 12%, why the decay is pure leverage, the cash-on-equity figure that lands at 3.7%, and the honest cost of the refinance ROE tempts you into.
11 min read2% rule vs 1% rule: which rental screen actually applies in 2026?
The 1% and 2% rules are the same rent-to-price screen with the bar at two heights. The GRM and cap-rate math underneath (1% ≈ a 6% cap at the 50% rule; 2% ≈ 12%), a same-dollar comparison where a 1% duplex cash-flows $3 a month while a $75K 2% house returns 16.4% cash-on-cash, and the risk the 2% niche carries that the spreadsheet doesn't price.
10 min readCap rate vs gross yield vs GRM: three quotes for the same building — and when each one lies
Gross yield, GRM, and cap rate measure the same income at different depths — two are literally the same fraction flipped. All three worked on a $250K duplex (11.5% gross, 8.7 GRM, 6.4% cap), the bridge formula that converts any quote into any other, a conversion table from 6% to 24% gross, and the identical-twin trap where two properties with the same gross yield sit $54,000 apart on income value.
10 min readWhat is a good rental yield? A consistent comparison method
Rental yield depends on the formula and the evidence behind it. How gross and net yield differ, what to verify before you compare two properties, and why consistent, property-specific inputs matter more than a market threshold.
10 min readCalculators for this
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