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How to Underwrite a Rental Property in 10 Minutes

•15 min read•Beginner

How to Underwrite a Rental Property in 10 Minutes

Quick Summary: Master the essential 10-minute underwriting framework that professional investors use to evaluate rental properties—learn how to rapidly calculate income, expenses, cash flow, and key return metrics to identify profitable deals before your competition. Use the Rental Property Calculator to instantly run these numbers on any property.

Time is money in real estate investing. While you're running a full 2-hour analysis, another investor closes the deal. This guide teaches you how to quickly underwrite rental properties using a systematic 10-minute framework that separates winners from losers.

Why Speed Matters in Underwriting

The Competitive Reality

Fast market (hot property):

  • Listed: Monday 9 AM
  • 15 showings by Monday 6 PM
  • 8 offers by Tuesday morning
  • Under contract by Tuesday afternoon

Your advantage:

  • Analyze in 10 minutes on Monday
  • Submit offer Monday evening
  • Beat the crowd

The 80/20 Principle

10-minute underwriting gives you:

  • 80% of the information needed
  • Ability to screen 20+ properties per day
  • Quick "yes/no/maybe" decisions
  • Time to deep-dive on winners only

Full underwriting (1-2 hours) is for:

  • Properties that pass initial screen
  • Before making offers
  • Final due diligence

The 10-Minute Framework

Tools You Need

Required (2 minutes to set up):

  • Spreadsheet or calculator
  • Rental comps (Zillow, Rentometer, local data)
  • Your financing terms (rate, down payment)
  • Your underwriting standards (minimum cash flow, ROI)

Optional but helpful:

The 6-Step Process

Step 1: Gross Income (90 seconds) Step 2: Operating Expenses (90 seconds) Step 3: Net Operating Income (30 seconds) Step 4: Financing & Cash Flow (2 minutes) Step 5: Cash-on-Cash Return (1 minute) Step 6: Go/No-Go Decision (4 minutes for notes and follow-up)

Let's work through a real example.

Step 1: Estimate Gross Rental Income (90 seconds)

Property Details

  • Address: 123 Oak Street
  • Price: $280,000
  • Bedrooms/Baths: 3BR / 2BA
  • Square Feet: 1,400
  • Condition: Average, needs cosmetic updates

Research Market Rent

Quick research (60 seconds):

  1. Open Zillow > search address > click "For Rent" tab
  2. Filter: 3BR, 1-2 miles, similar condition
  3. Note 5-8 comparable rents
  4. Take conservative average

Comparable rents found:

  • 3BR/2BA, 1,350 SF, good condition: $2,200
  • 3BR/2BA, 1,500 SF, excellent condition: $2,400
  • 3BR/1.5BA, 1,300 SF, fair condition: $1,900
  • 3BR/2BA, 1,450 SF, average condition: $2,100

Analysis (30 seconds):

  • High: $2,400
  • Low: $1,900
  • Average: $2,150
  • Conservative estimate: $2,000/month (below average due to updates needed)

Annual Gross Income:

$2,000 × 12 = $24,000

Pro tip: Always round down for conservative underwriting.

Step 2: Estimate Operating Expenses (90 seconds)

Use the 50% Rule for quick screening, then adjust.

The 50% Quick Method

Rule of thumb: Operating expenses typically run 40-50% of gross income.

50% Rule = $24,000 × 0.50 = $12,000/year in operating expenses

What this covers:

  • Property taxes
  • Insurance
  • Property management
  • Maintenance and repairs
  • Vacancy
  • CapEx reserves
  • Other operating costs

The 60-Second Detailed Method (More Accurate)

For better accuracy, break out the big three:

1. Property Taxes (20 seconds):

  • Look up on county assessor website, or
  • Estimate: $280,000 × 1.5% = $4,200/year
  • (Adjust % for your market: TX = 2-3%, HI = 0.3-0.5%)

2. Insurance (20 seconds):

  • Landlord policy typically: $800-1,500/year
  • Estimate: $1,200/year

3. Other Operating Expenses (20 seconds):

  • Property Management: 8-10% of rent = $2,400/year
  • Maintenance: 5-8% of rent = $1,800/year
  • Vacancy: 5% of rent = $1,200/year
  • CapEx Reserve: 5% of rent = $1,200/year
  • Utilities/Other: $600/year
  • Subtotal: $7,200/year

Total Operating Expenses:

Taxes: $4,200
Insurance: $1,200
Other: $7,200
Total: $12,600/year (52.5% of gross income)

Takeaway: The 50% rule was close ($12,000), detailed method is $12,600—use whichever you're comfortable with for speed.

Step 3: Calculate Net Operating Income (30 seconds)

Simple subtraction:

Net Operating Income (NOI) = Gross Income - Operating Expenses
NOI = $24,000 - $12,600 = $11,400

What NOI tells you:

  • Property's earning power before financing
  • Used to calculate cap rate
  • Key metric for comparing properties

Quick Cap Rate (15 seconds):

Cap Rate = NOI / Purchase Price
Cap Rate = $11,400 / $280,000 = 4.07%

Is 4.07% cap rate good? Depends on market (more on this later).

Step 4: Financing & Cash Flow (2 minutes)

Determine Your Financing (30 seconds)

Example financing:

  • Purchase Price: $280,000
  • Down Payment (25%): $70,000
  • Loan Amount: $210,000
  • Interest Rate: 7.0%
  • Term: 30 years

Calculate Monthly Payment (60 seconds)

Method 1: Online calculator

  • Google "mortgage calculator"
  • Enter: $210,000, 7%, 30 years
  • Result: $1,398/month

Method 2: Quick formula

Payment ≈ Loan × (Rate/12) × 1.05
Payment ≈ $210,000 × (0.07/12) × 1.05 ≈ $1,400/month

Annual Debt Service:

$1,398 × 12 = $16,776/year

Calculate Cash Flow (30 seconds)

Annual Cash Flow = NOI - Annual Debt Service
Cash Flow = $11,400 - $16,776 = -$5,376/year

Result: NEGATIVE cash flow of $448/month

Red flag: This property doesn't cash flow with standard financing.

Step 5: Calculate Cash-on-Cash Return (1 minute)

Even with negative cash flow, let's complete the analysis.

Total Cash Invested

Down Payment: $70,000
Closing Costs (3%): $8,400
Repairs/Updates: $5,000
Reserves (3 months): $6,000
Total Cash Invested: $89,400

Cash-on-Cash Return

CoC Return = Annual Cash Flow / Total Cash Invested
CoC Return = -$5,376 / $89,400 = -6.0%

Result: You're losing 6% annually on your invested capital.

Step 6: Go/No-Go Decision (4 minutes)

Decision Framework

Pass Immediately If:

  • Negative cash flow (unless appreciation play)
  • Cash-on-Cash below your minimum (typically 6-8%)
  • Cap rate below market average
  • Property needs major systems replaced
  • Location declining or high crime

Maybe (Investigate Further) If:

  • Marginal cash flow (1-4% CoC)
  • Below-market rents (upside potential)
  • Cosmetic repairs only
  • Strong appreciation market
  • Can add value easily

Green Light If:

  • 6%+ Cash-on-Cash return
  • Positive monthly cash flow ($200+)
  • At or above market rents
  • Property in good condition
  • Strong rental demand area

Our Example: The Verdict

123 Oak Street:

  • Cash Flow: -$448/month ❌
  • CoC Return: -6% ❌
  • Cap Rate: 4.07% (below typical 6-8%) ❌
  • Requires updates ⚠️

Decision: PASS

However, let's test one scenario (60 seconds):

What if we can increase rent to $2,300/month after $10K in updates?

New Gross Income: $27,600/year
New NOI: $27,600 - $13,800 = $13,800
Cash Flow: $13,800 - $16,776 = -$2,976/year
Still negative: PASS

Note for follow-up: Property needs $2,500/month rent or better financing to work.

Real Example: A Winner

Let's underwrite a second property using the same 10-minute process.

Property #2: 456 Maple Lane

Details:

  • Price: $180,000
  • Bedrooms/Baths: 3BR / 2BA
  • Condition: Good, rent-ready

Step 1: Gross Income (60 seconds)

  • Comparable rents: $1,800-2,000
  • Conservative: $1,850/month
  • Annual: $22,200

Step 2: Operating Expenses (60 seconds)

  • Taxes (1.2%): $2,160
  • Insurance: $900
  • Other (8% + 5% + 5% + 5%): $5,100
  • Total: $8,160/year (36.8%)

Step 3: NOI (15 seconds)

NOI = $22,200 - $8,160 = $14,040
Cap Rate = $14,040 / $180,000 = 7.8% ✓

Step 4: Financing (90 seconds)

  • Down payment (25%): $45,000
  • Loan: $135,000 at 7% = $898/month = $10,776/year
  • Cash Flow: $14,040 - $10,776 = $3,264/year ($272/month) ✓

Step 5: Cash-on-Cash (45 seconds)

  • Total invested: $45,000 + $5,400 + $3,000 = $53,400
  • CoC: $3,264 / $53,400 = 6.1% ✓

Step 6: Decision (30 seconds)

  • Positive cash flow: $272/month ✓
  • 6.1% CoC return ✓
  • 7.8% cap rate ✓
  • Good condition ✓

Verdict: GREEN LIGHT—Schedule showing and run full analysis

The 10-Minute Underwriting Cheat Sheet

Time Allocation

Step Task Time Method
1 Gross Income 90s Zillow comps, conservative average
2 Operating Expenses 90s 50% rule or quick itemized
3 NOI & Cap Rate 30s Subtraction, simple division
4 Financing & Cash Flow 120s Mortgage calc, subtract from NOI
5 Cash-on-Cash 60s Total cash invested, divide
6 Go/No-Go 240s Compare to criteria, note follow-ups
Total 10 min

Your Personal Underwriting Standards

Define these before you start analyzing:

Minimum Acceptable:

  • Cash Flow: $______/month (e.g., $200+)
  • Cash-on-Cash: ______% (e.g., 6%+)
  • Cap Rate: ______% (e.g., 7%+ for your market)

Automatic Pass Triggers:

  • Needs foundation/structural work
  • Needs new roof ($______+ expense)
  • In flood zone
  • HOA over $______/month
  • Crime rate above ______ (check NeighborhoodScout)

Automatic Deep-Dive Triggers:

  • Cash Flow: $400+/month
  • CoC: 8%+
  • Below-market rents (20%+ upside)
  • Value-add opportunity under $15K

Advanced 10-Minute Tricks

1. The "1% Rule" Pre-Screen (30 seconds)

Before you even start the 10-minute process:

1% Rule: Monthly rent should equal 1% of purchase price
$280,000 property should rent for $2,800/month

Our examples:

  • Property #1: $280K asking $2,000 rent = 0.71% ❌ (warning sign)
  • Property #2: $180K asking $1,850 rent = 1.03% ✓ (passes screen)

Use this to eliminate dogs instantly.

2. The "200:1 Rule" (15 seconds)

Price-to-Rent Ratio = Purchase Price / Annual Rent

Good deals:

  • Ratio under 15 = Excellent cash flow market
  • Ratio 15-20 = Good for investors
  • Ratio 20-25 = Marginal (appreciation play)
  • Ratio over 25 = Buyer market, tough to cash flow

Our examples:

  • Property #1: $280K / $24K = 11.7 (decent) ✓
  • Property #2: $180K / $22.2K = 8.1 (excellent) ✓✓

3. Back-of-Envelope Cap Rate (20 seconds)

Don't have time to calculate exact expenses?

Quick Cap Rate ≈ (Monthly Rent × 6) / Purchase Price

Property #1:

($2,000 × 6) / $280,000 = 4.3%

Property #2:

($1,850 × 6) / $180,000 = 6.2%

Why × 6? Assumes 50% operating expenses, simplifies to 6 months of rent as NOI.

Common 10-Minute Underwriting Mistakes

1. Using Asking Price Instead of Offer Price

Wrong:

  • Analyze at $280,000 asking price
  • Decide it doesn't work
  • Move on

Right:

  • Analyze at $280,000
  • Doesn't work
  • Run scenario at $250,000 (10% discount)
  • Submit offer if numbers work

Pro move: Run every property at asking price AND asking -10%.

2. Using Aspirational Rent

Wrong:

  • "I could get $2,400 if I renovate the kitchen"
  • Underwrite at $2,400

Right:

  • Current rent: $2,000
  • After $15K renovation: $2,300 (conservative)
  • Underwrite at $2,000 first
  • Separate analysis: $15K cost, $300/month increase = 24-month payback

3. Forgetting Closing Costs & Reserves

Wrong:

Cash Invested = $70,000 down payment
CoC = $4,200 / $70,000 = 6%

Right:

Cash Invested = $70,000 + $8,400 closing + $5,000 reserves = $83,400
CoC = $4,200 / $83,400 = 5%

Big difference: 6% vs 5% changes whether you hit your minimums.

4. Not Adjusting for Actual Property Taxes

Wrong:

  • Use Zillow's estimated taxes: $2,400/year
  • Underwrite based on that

Right:

  • Check county assessor: $4,800/year (based on purchase price)
  • Property reassessed after sale
  • Underwrite using actual post-purchase taxes

Impact: $2,400/year difference = $200/month in cash flow

5. Ignoring CapEx

Wrong:

  • Only account for repairs and maintenance
  • "I'll deal with the roof when it needs it"

Right:

  • Budget 5-10% of rent for future CapEx (roof, HVAC, appliances)
  • $2,000 rent × 5% = $100/month = $1,200/year
  • Impacts cash flow by $100/month

When to Go Deeper (Full Underwriting)

The 10-minute screen said "Maybe" or "Yes"—now what?

Level 2 Analysis (30-45 minutes):

  • Request actual property tax bill
  • Get insurance quotes (3 carriers)
  • Research specific comps (not just Zillow)
  • Drive by property (location, condition, neighborhood)
  • Check CapEx needs (age of roof, HVAC, water heater)
  • Review HOA docs (if applicable)
  • Research landlord-tenant laws
  • Calculate multiple financing scenarios

Level 3 Due Diligence (after offer accepted):

  • Professional inspection
  • Appraisal
  • Rent comps analysis with property manager
  • Talk to neighbors
  • Review utility costs
  • Check for permits and code compliance
  • Run final numbers with actual data

Scaling Your Analysis: Underwriting 10+ Properties Per Day

Batch Processing (2 hours = 10-12 properties)

Setup (15 minutes):

  1. Spreadsheet with your formulas
  2. Financing terms already entered
  3. Market data researched (average taxes, insurance, PM rates)
  4. Your criteria clearly defined

Per Property (10 minutes each):

  1. Input address and asking price
  2. Research rent (90 seconds)
  3. Estimate expenses (90 seconds)
  4. Review output: cash flow, CoC, cap rate
  5. Decision: Pass, Maybe, or Green Light
  6. Add notes and next steps

End of Day (30 minutes):

  • Review all "Maybe" and "Green Light" properties
  • Schedule showings
  • Prepare offers for top 2-3
  • Add "Pass" properties to watchlist (price drops)

Tools to Speed Things Up

For Rent Research:

  • Zillow saved searches
  • Rentometer
  • Local property manager (quick text)

For Expenses:

  • County tax lookup saved
  • Insurance agent on speed dial
  • Standardized expense % by market

For Calculations:

10-Minute Underwriting by Market Type

Cash Flow Markets (Midwest, South)

Characteristics:

  • Higher cap rates (8-12%)
  • Lower purchase prices ($80K-200K)
  • Faster screening (prices don't justify complex analysis)

10-minute focus:

  • Gross rent (very important)
  • Property taxes (can be high)
  • Neighborhood safety (make-or-break)

Typical results:

  • 8-12% cash-on-cash common
  • $300-500/month cash flow per unit
  • Immediate yes/no decisions

Appreciation Markets (Coasts, Major Cities)

Characteristics:

  • Lower cap rates (3-5%)
  • Higher purchase prices ($400K-1M+)
  • Long-term appreciation focus

10-minute focus:

  • Price-to-rent ratio (high is normal)
  • Loan structure (minimize monthly payment)
  • Hidden value (ADU potential, zoning changes)

Typical results:

  • 2-5% cash-on-cash common
  • Break-even or slight negative cash flow acceptable
  • More "maybe" decisions require deep dives

Hybrid Markets (Growing Secondary Cities)

Characteristics:

  • Moderate cap rates (6-8%)
  • Moderate prices ($200K-400K)
  • Both cash flow and appreciation potential

10-minute focus:

  • Balance between cash flow and upside
  • Rent growth trends
  • Job market and population growth

Typical results:

  • 6-10% cash-on-cash
  • $200-400/month cash flow
  • Best of both worlds

Practice Exercise: Underwrite These in 10 Minutes

Property A

  • Price: $320,000
  • Rent comps: $2,500-2,800
  • Taxes: 1.8% of value
  • 25% down, 7% interest, 30 years

Your turn: Run the numbers. Pass or pursue?

Property B

  • Price: $150,000
  • Rent comps: $1,400-1,600
  • Taxes: $2,000/year
  • 20% down, 7.5% interest, 30 years

Your turn: What's the cash-on-cash return?

Property C

  • Price: $425,000
  • Rent comps: $2,200-2,400 (tough market)
  • Taxes: $8,500/year
  • 30% down, 6.5% interest, 30 years

Your turn: Cash flow positive or negative?

Answers at bottom of guide.

The Bottom Line

Speed matters in competitive markets, but speed without accuracy is reckless. The 10-minute underwriting framework gives you both:

What you get:

  • 80% accuracy in 10% of the time
  • Ability to screen 10-20+ properties per day
  • Quick yes/no decisions
  • More time for deep analysis on winners

What you avoid:

  • Analysis paralysis
  • Missing deals to faster investors
  • Wasting time on obvious losers
  • Emotional attachment before running numbers

Key Takeaways:

  1. Pre-screen with 1% rule (30 seconds)
  2. Gross income: Conservative rent estimate (90 seconds)
  3. Operating expenses: 50% rule or quick itemize (90 seconds)
  4. Cash flow: NOI minus debt service (2 minutes)
  5. Cash-on-Cash: Include ALL invested capital (1 minute)
  6. Decision: Compare to your minimums (4 minutes)

Your next steps:

  • Define your minimum standards (cash flow, CoC, cap rate)
  • Create or download a simple spreadsheet template
  • Practice on 10 properties this week
  • Track your accuracy (compare 10-minute to full analysis)
  • Adjust your process based on results

The best investors aren't the ones who run the most detailed analysis—they're the ones who run enough analysis, quickly enough, to find and close on great deals before the competition.

Master this framework, and you'll never miss another opportunity due to slow analysis.

Practice Exercise Answers

Property A

  • Gross Income: $2,650 × 12 = $31,800
  • Expenses (50%): $15,900
  • NOI: $15,900
  • Loan: $240,000 at 7% = $1,598/month = $19,176/year
  • Cash Flow: -$3,276/year (-$273/month) ❌
  • Decision: PASS (unless strong appreciation play)

Property B

  • Gross Income: $1,500 × 12 = $18,000
  • Expenses: $2,000 + (8% + 10%) × $18,000 = $5,240
  • NOI: $12,760
  • Loan: $120,000 at 7.5% = $839/month = $10,068/year
  • Cash Flow: $2,692/year ($224/month)
  • Total Invested: $30,000 + $4,500 + $3,000 = $37,500
  • CoC: 7.2% ✓
  • Decision: GREEN LIGHT

Property C

  • Gross Income: $2,300 × 12 = $27,600
  • Expenses: $8,500 + $13,800 × 0.35 = $13,330
  • NOI: $14,270
  • Loan: $297,500 at 6.5% = $1,880/month = $22,560/year
  • Cash Flow: -$8,290/year (-$691/month) ❌
  • Decision: PASS (typical expensive market problem)

Use the Rental Property Calculator to verify your answers and practice more scenarios.