How to Analyze a Rental Property: Real Numbers, Real Results

You’ve found a promising property—great neighborhood, decent rent, strong listing photos. But what do the numbers say?

In this article, we’ll run a full analysis on a real investment property and walk through five critical metrics: Cap Rate, Cash Flow, Cash-on-Cash Return, Gross Rent Multiplier (GRM), and our proprietary Deal Score. These metrics together give you a full 360° view of whether a rental property is truly worth pursuing.

🔎 The Example Property

Here are the key metrics for this investment:

📐 Cap Rate: Is the Income Worth the Price?

Cap Rate = Net Operating Income (NOI) ÷ Purchase Price

Cap Rate is the classic rental analysis metric. It tells you how efficiently a property generates income before financing. For this property, annual rent is $43,000. Subtracting $18,750 in operating expenses gives us an NOI of $24,250. Dividing that by the $288,700 purchase price gives a Cap Rate of 8.4%.

That’s healthy—especially for a single-family rental with financing. A cap rate over 8% suggests strong income relative to the price, assuming the expense estimates are realistic.

Learn more about Cap Rate →

💵 Cash Flow: What’s Left After Everything

Cash Flow = Rent – Operating Expenses – Loan Payments

Cash Flow is your actual income after expenses and mortgage payments. With $24,250 in NOI and $17,123 in annual debt service (based on a $220K loan at 6.75%), this deal generates about $7,127 per year—or $594/month—in positive cash flow.

This means the property supports itself and builds reserves or reinvestment capital. Positive cash flow—especially this strong—adds a layer of safety and flexibility.

See how we calculated Cash Flow →

📊 Cash-on-Cash Return: What Your Investment Really Earns

CoC Return = Annual Cash Flow ÷ Total Cash Invested

Total cash invested includes the down payment plus rehab: $68,700 (down payment) + $11,500 (rehab) = $80,200 total invested. With annual cash flow of $7,127, your Cash-on-Cash Return is 8.9%.

That’s a solid return—comparable to long-term stock market averages—but with control, leverage, and potential for appreciation. It’s an efficient use of cash and shows this deal performs well even after renovations.

Understand CoC Return →

⚖️ GRM: Fast Filter for Rent vs Price

GRM = Property Price ÷ Annual Rent

Gross Rent Multiplier helps you compare properties quickly by asking, “How many years of rent would it take to equal the purchase price?” In this case: $288,700 ÷ $43,000 = GRM of 6.7.

A GRM under 8 is typically considered good in most markets. This deal passes the quick screen and is worth deeper analysis—which we’ve already done.

How to use GRM effectively →

🏁 Deal Score: Bringing It All Together

Deal Score is PropertyAnalyzer’s proprietary 0–100 investment rating that brings together all the key metrics used in your analysis and rolls them into a single, easy-to-read number. It’s designed to give you a fast, comprehensive snapshot of any rental property’s performance—so you can quickly compare deals and make confident, data-driven decisions.

Unlike other tools, Deal Score isn’t limited to just Cap Rate or Cash Flow. It can incorporate dozens of customizable metrics—including return on equity, expense ratios, leverage profile, long-term yield, and many more—depending on what matters most to you as an investor.

The system is fully customizable. You can set your own target thresholds for each metric—whether you prioritize cash-on-cash return, low vacancy exposure, or conservative financing—and PropertyAnalyzer will automatically grade each deal based on how well it aligns with your goals. You define what makes a “good” deal.

For this property, the Deal Score is 64 out of 100. That places it just under the default benchmark for a “high-performing” deal. But score is only part of the story. The breakdown below shows how the property performed against each target—and where there may be room for improvement or opportunity:

A score in the 60s doesn’t mean the deal is bad—it means it may require context. In this case, the property performs well on income and return but dips slightly on expenses and debt profile. Depending on your risk tolerance, timeline, and portfolio strategy, it could still be an excellent fit.

See how Deal Score works →

✅ Final Takeaway

So, is this a good rental property investment?

Here’s what the numbers say:

• Cap Rate: 8.4% — very healthy for a stable single-family rental
• Monthly Cash Flow: $594 — strong positive income after all costs
• Cash-on-Cash Return: 8.9% — efficient use of invested capital
• GRM: 6.7 — below the common 8–12 threshold for solid value
• Deal Score: 64 — under the target, but backed by strong fundamentals

Ultimately, these rental property metrics help you go beyond surface-level listings. They reveal whether a deal truly fits your strategy—whether you're focused on cash flow, return on investment, or risk-balanced long-term value.

Would you invest in this deal? If you're looking for steady income, strong fundamentals, and a chance to improve value post-rehab, it's a solid contender. And now you know how to break it down like a pro.

Run Your Own Deal Analysis →