The 40-Point Rental Deal Checklist (Before You Offer)

Most bad rental purchases fail on something that was knowable before the offer. The taxes reset at the new price, the insurance quote came in 65% above the listing's figure, the third bedroom was never permitted. None of these are surprises to a buyer who checks. They are surprises to a buyer who trusted the listing sheet.

The example in this post shows the size of the gap. A listing advertises an 8.85% cap rate and $619 a month of cash flow. After six checks from the list below, the same house shows a 5.62% cap rate and loses $79 a month. Nothing about the property changed between those two numbers. The only difference is who did the arithmetic.

How to use this list: screen, verify, decide

Work the list in three passes, and let each pass earn the next one.

For the screening pass, the method in analyzing a rental property in 10 minutes covers the quick math. This list is what comes after a deal survives it.

Give every item one of three statuses: verified (you hold a document), assumed (you used an estimate, and wrote down which) or open. An offer with open items in the numbers section is a guess with a signature on it.

Example: what six checks do to a listing pro forma

Illustrative figures. The house is listed at $260,000, and the financing is 25% down at an example rate of 7.0% for 30 years, which is $1,297 a month or $15,568 a year.

The verified column adds up as follows: $26,400 less $1,320 of vacancy is $25,080 collected. Expenses total $10,456. Net operating income is $14,624, and after $15,568 of debt service the house loses $944 a year. The tax line alone comes from one check: the seller's $2,400 bill on a $150,000 assessment implies a 1.6% effective rate, and 1.6% of $260,000 is $4,160.

The numbers: twelve financial checks

The percentages below are rules of thumb for a first pass. Replace each with a real figure during verification.

• 1. Rent is supported by leased comps. Find five recent rentals with the same bedroom count in the same neighborhood and underwrite to the low end of the band.
• 2. Vacancy is in the model at 5% or more. For a single family house one empty month is 8.3% of the year, so a 5% assumption already expects long tenancies.
• 3. Property taxes are recalculated at your price. Many jurisdictions reassess on sale. Multiply the local effective rate by your purchase price and confirm the reassessment rules with the assessor's office.
• 4. Insurance is a written quote for a landlord policy at this address. Ask about wind, hail and flood exclusions.
• 5. Management is charged even if you will self-manage. Use 8% to 10% of collected rent plus a leasing fee as a placeholder. Your time has a cost, and you may hire it out later.
• 6. Maintenance and capital reserves are two separate lines. Repairs are annual. Reserves fund the roof and the furnace. Size reserves from the ages in items 13 and 14, not from a flat percentage, once you have them.
• 7. Utilities and HOA dues are assigned and documented. Get 12 months of bills for anything the owner pays, and read the HOA budget and rental rules.
• 8. The expense ratio passes a sanity test. Operating expenses under about 35% of gross rent on a house usually mean a line is missing. The example's verified expenses are 39.6% of gross rent; the listing's were 16.7%.
• 9. NOI and cap rate are computed from your numbers. Compare your cap rate with recent sales of similar rentals. A listing cap rate far above the local norm is more often an arithmetic gift than a bargain. The pro forma guide walks through each line.
• 10. Cash flow uses a loan quote you could close on. Use today's quoted rate for your loan type and occupancy, with mortgage insurance if it applies.
• 11. Cash-on-cash counts every dollar in. Down payment, closing costs, immediate repairs, and the reserves you fund at closing all belong in the denominator.
• 12. DSCR and break-even occupancy clear your floor. Lenders commonly want a DSCR of 1.20 to 1.25 on income-qualified loans. A break-even occupancy above roughly 85% leaves little room for a bad year. Then stress the model: rent down 10%, vacancy doubled, and see what survives.

The property: ten physical and title checks

Physical condition

• 13. Roof age and remaining life, in writing. Ask for the install date and any warranty. A roof near the end of its life is a price reduction or a reserve you fund at closing.
• 14. HVAC and water heater ages from the data plates. Equipment past its typical service life goes on the capital schedule with a replacement cost.
• 15. Foundation, grading and water. Look for stair-step cracks, doors that bind, soil sloping toward the house, and staining in the basement or crawl space.
• 16. Plumbing and electrical types. Galvanized or polybutylene supply lines, cast iron drains, knob-and-tube or aluminum branch wiring, and fuse panels can make a house hard to insure. On older homes, pay for a sewer scope.
• 17. A licensed inspection converted into a dollar list. Turn each finding into a cost, split into "before a tenant moves in" and "within five years", and feed both totals back into items 6 and 11.

Legal and title

• 18. Permit history matches the house. Pull municipal permit records and compare them with the additions, finished basement, garage conversion and bedroom count you see. Unpermitted space can be uninsurable, unrentable or both.
• 19. Title commitment read, including the exceptions. Look for liens, easements, encroachments and unreleased mortgages. The exceptions schedule lists what the title policy will not cover, and that is where the problems live.
• 20. Zoning and rental licensing allow your plan. Confirm the legal unit count, any rental registration or inspection program, occupancy limits and short-term rental rules with the city, not the listing agent.
• 21. Existing leases, ledgers and deposits. For an occupied property get every lease, a 12-month payment ledger and a signed tenant estoppel confirming rent, deposit and any side agreements. Deposits should transfer to you at closing.
• 22. Flood zone, lead paint and environmental flags. Check the flood map before anything else, because required flood insurance can erase the cash flow. Homes built before 1978 carry lead disclosure duties. Ask about buried oil tanks, radon and past mold remediation.

The market: eight location and demand checks

• 23. Comparable rentals lease quickly. Days on market for rentals like yours is the most direct measure of demand. If similar units sit for six weeks, raise your vacancy assumption.
• 24. The tenant base has more than one employer. Identify who rents in this area and where they work. A town that depends on a single plant or base carries a risk no spreadsheet line captures.
• 25. Population and jobs are moving in the right direction. Look up the metro's multi-year population and employment trend from Census and Bureau of Labor Statistics data.
• 26. Rent-to-price ratio compared with the rest of the metro. Monthly rent divided by price is a rule-of-thumb screen only. It is useful for ranking neighborhoods against each other, and a ratio far above the area norm is a prompt to ask what the market knows.
• 27. New supply nearby. Check building permits and drive past construction sites. A large apartment community in lease-up will offer concessions that pull tenants from older houses for a year or more.
• 28. The block, in person, at two times of day. Visit on a weekday evening and a weekend morning. Note the condition of neighboring houses, the share that look owner occupied, parking and noise.
• 29. School zone and local crime data. Family tenants shop by school assignment, and it drives resale value. Use published data and apply the same screening standards to every applicant regardless.
• 30. Landlord-tenant law and local regulation. Learn the eviction timeline, notice periods, deposit rules, any rent regulation and source-of-income protections before you own. A three-month eviction process belongs in your reserve math.

The deal: ten transaction and financing checks

Financing

• 31. A written loan estimate, with rate, points, fees and lock period. Investment property pricing differs from owner-occupant pricing, so the quote has to be for this use.
• 32. The loan type fits the property and the plan. Conventional investment loans commonly need 15% down on one unit and 25% on two to four units. DSCR loans qualify on the property's rent, commonly with 20% to 25% down, and may carry a prepayment penalty that matters if you plan to refinance or sell early.
• 33. Cash to close plus reserves is tallied and sourced. Lenders often require several months of payments in reserve for each financed property. Add your own operating reserve on top and confirm the money is seasoned in an account the lender will accept.
• 34. A plan for a low appraisal. Decide now whether you would cover a gap in cash, renegotiate or walk.

Contract

• 35. Contingency dates you can meet. Calendar the inspection, financing and appraisal deadlines the day the contract is signed, and book the inspector before you need them. A missed deadline can put earnest money at risk.
• 36. Repair requests made in dollars. Ask for a price reduction or a closing credit backed by the dollar list from item 17.
• 37. Closing statement checked line by line. Confirm prorated rent, transferred deposits, tax prorations and every lender fee against the loan estimate.
• 38. Title vesting and insurance decided before closing. Most residential loans close in a personal name. Moving title to an LLC later can technically trigger the due-on-sale clause, though enforcement is rare, so ask the lender and an attorney first. Price a landlord policy with adequate liability limits and an umbrella policy either way.

Exit

• 39. The exit is modeled with selling costs and a flat price. Test a sale in year five at today's price with agent commissions and closing costs deducted. If the deal only works with appreciation, you are speculating, and you should know that going in.
• 40. A written walk-away price. Before negotiating, set the maximum price at which items 10 through 12 still clear your floors. Write it down. It protects you from the momentum of a deal you have already spent three weeks on.

The checklist as a system, not a ritual

A checklist fails when it becomes a form to initial. Three habits keep it working.

Rerun the numbers after every verified item. Each document you collect replaces an assumption. In the example, the tax check alone moved annual expenses by $1,760 and the insurance quote added $650. The model should be current on the day you decide, with every line traceable to a source.

Set kill criteria in advance. Decide which findings end the deal without discussion: required flood insurance that pushes DSCR under 1.0, an unpermitted unit the rent depends on, a title defect the seller cannot cure. The most common first-time underwriting mistakes are nearly all cases of a buyer seeing the problem and negotiating with themselves.

Keep the file. Save the comp sheet, quotes, inspection dollar list, title commitment and the final model together. At refinance or sale you will need them, and on your next purchase they become your benchmarks for what taxes, insurance and repairs cost in this market.

Practical next steps: copy the 40 items into a sheet with status, source and date columns. Run the screening items on the next three listings you look at and note how many survive. For the one that does, enter the verified figures in the single family calculator and update it as documents arrive.

When the analysis is final, Pro's PDF export packages the full pro forma, projections and metrics into one document. Staple it to the completed checklist and the offer file is ready for a lender or a partner, with every assumption in the report matched to a checked item on the list.