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12 numbers to confirm before you make an offer on a rental

By Ryan Ascott3 min read

The short answer

Get three numbers from a real source instead of the listing: the rent similar homes lease for, the tax bill after you buy, and an insurance quote. Estimate the other nine, from empty months to closing costs, then test the one that would flip the answer.

A rental works or doesn’t on about a dozen numbers. Most of them are sitting in the listing, the seller’s sheet or your own head, and some of those are wrong in ways that matter.

Here are the 12 to confirm before you make an offer, grouped by where they come from.

Three numbers to get from a real source

These are easy to copy from a listing and costly to get wrong.

  1. The rent similar homes actually lease for. Not the asking rent in the listing and not the seller’s estimate. Look for nearby homes with the same bedrooms and bathrooms that rented recently, and ask a local property manager what this one would get.
  2. The property tax bill after you buy. Use the county’s tax rate on the price you’re paying. In many places a sale resets the assessed value, the figure the county taxes, so the seller’s bill can be lower than yours will be.
  3. An insurance quote for this address. A landlord policy often costs more than a homeowner’s policy on the same house, and the location, the roof’s age and the claims history all move the price. Ask an agent to quote the actual property.

Five monthly costs to estimate

You can’t get these in writing, but you can pick sensible numbers and see what happens when they’re wrong.

  1. Empty months. Plan for the house to sit empty some of the year. At 5% of rent, you’re planning for about 18 days a year.
  2. Repairs. The small, steady stuff: a leak, a dishwasher, a broken window. A common starting point is 5% to 10% of rent, higher for older homes.
  3. Money for big repairs. Roofs, furnaces, air conditioners and water heaters wear out. Ask how old each one is, because an old roof or furnace means setting more aside from the start.
  4. Property management. What a manager would charge, even if you plan to do it yourself. If you ever hand it off, the deal has to survive that cost.
  5. HOA dues and utilities you pay. Association fees, plus any utilities the landlord covers, such as water, sewer or trash.

Four numbers that decide the cash you need

  1. Work before the first tenant. Paint, flooring and any repairs the inspection turns up. Price it before you offer, not after.
  2. The loan. Your down payment, interest rate and term together set the monthly payment, which is usually the biggest cost on the list.
  3. Closing costs. Lender fees, title, recording, and prepaid taxes and insurance. Ask your lender for an estimate.
  4. The total cash you’ll need. Down payment, closing costs and the work before the first tenant, plus a cushion for the first surprise.

What do you do with the 12 numbers?

Put them into the rental calculator. It turns them into monthly cash flow and names the number that would flip the answer.

Then work on that number first. If the deal only works at the seller’s rent, get a second opinion on rent. If it only works with a cheap insurance guess, get the quote. If nothing gets it there, the fix is usually the price you offer.

To see how far a paper profit can fall once these numbers are real, read about the rental that showed $966 a month on paper.

More straight answers

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  2. What occupancy does an Airbnb need to break even? This one needs 71%.

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  3. BRRRR example: $20,000 off the appraisal doubles the cash stuck in the house

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