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Investment properties are financial assets. Underwriting the numbers correctly is more important than the property itself.
Your Next Move Deserves a Plan.
Common return metrics include cash-on-cash return, cap rate, gross rent multiplier, and internal rate of return. Each answers a different question — use them together, not alone.
Realistic underwriting includes property taxes, insurance, management, maintenance, vacancy reserve, utilities (if owner-paid), capital reserves, and HOA fees where applicable.
Debt Service Coverage Ratio (DSCR) loans qualify borrowers primarily on the property's rental cash flow rather than personal income. Rates, LTVs, and reserve requirements vary by lender.
Commercial loans typically require larger down payments, shorter amortizations or balloon terms, and stronger financials than residential loans. Terms are negotiated per deal.
In addition to structural inspections, commercial and multi-unit buyers often order environmental (Phase I ESA), roof, HVAC, and property condition assessments.
Review existing leases, rent rolls, security deposits, tenant estoppels, and any lease guaranties. Lease terms directly affect the value and financing of the asset.
Get contractor bids for scope items — roof, systems, kitchens, baths, exterior, and code compliance. Build in a contingency; rehab budgets frequently exceed initial estimates.
A 1031 exchange can defer capital gains taxes by reinvesting proceeds into like-kind property within strict IRS timelines (typically 45-day identification, 180-day close). Consult a qualified intermediary and tax advisor.
How much down payment do investment properties require?
Residential investment loans commonly require 15–25% down; DSCR and commercial loans often 20–30% or more, depending on the property and lender.
Should I self-manage or hire a property manager?
Self-management can improve cash flow but costs time. Professional management typically runs 8–10% of gross rents in residential and varies in commercial.
Is a 1031 exchange right for me?
That depends on your tax situation and goals. Speak with a CPA and a qualified intermediary before selling.
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Discuss an Investment DealInformation is provided for general education and is not legal, tax, lending, or financial advice. Programs, eligibility, financing terms, and property information must be independently verified.