Most rental calculators are built to make every deal look good. This guide does the opposite. It shows you the handful of numbers that actually decide whether a rental makes money, the costs that quietly turn a "great deal" into a money pit, and a simple process you can run on any property before you offer.
A rental is a good deal when it pays you positive cash flow after every real expense, earns a healthy return on the cash you put in, covers its own loan, and still works at a price you can actually get it for. If it only works assuming rising rents or a perfect interest rate, it is not a good deal, it is a bet.
Cash flow is what lands in your pocket each month after the mortgage and every operating expense. The word that trips up beginners is real. A deal that looks positive on the back of a napkin often turns negative once you include the costs that do not show up on the listing: vacancy between tenants, ongoing maintenance, big-ticket repairs, and property management.
If a property cash flows comfortably after all of those, you own an asset. If it only breaks even before them, you have bought yourself a second job that you also pay to keep.
Ignore the dozens of metrics floating around. Four of them do the real work.
| Number | What it tells you | Healthy in 2026 |
|---|---|---|
| Cash flow | Monthly profit after the mortgage and all expenses | Positive, with a cushion |
| Cash-on-cash return | Annual cash flow divided by the cash you invested | 8% or higher |
| DSCR | The property's income versus its loan payment | 1.25x or higher |
| Cap rate | Income versus price, ignoring the loan | Roughly 6% or higher |
DSCR deserves special attention in 2026. It is the lender's test: net operating income divided by the annual loan payment. Most debt-service-coverage lenders will not fund a deal below about 1.20 to 1.25, and anything under 1.0 means the property loses money before you even show up. If your deal is below that line, expect a higher rate, a bigger down payment, or a no.
These four costs are where beginners lose money, because they are easy to leave out and painful to discover later.
A quick sanity check: over time, operating costs tend to run near half of the rent. If your budgeted expenses come in far below that, you have probably forgotten something.
Every deal has a price above which it stops making money for you. That is your walk-away price, and the single most valuable habit in real estate is deciding it before you fall in love with the property, then refusing to cross it in a bidding war.
Your walk-away price depends on your goal. Break-even is one line. A target monthly cash flow is a lower line. Hitting a lender's DSCR is another. Pick the one that matches how you invest, write the number down, and let the deal earn a yes.
The 1% rule, monthly rent of at least 1% of the purchase price, was a handy screen when rates were low. At today's financing costs it rarely holds, and treating it as a pass-fail test will make you dismiss workable deals and chase unrealistic ones. Use it to decide whether a property is worth modeling, never to decide whether to buy.
The DealGauge calculator runs this whole process for you. Enter a property and get an A-to-F grade, the verdict, and your exact walk-away price.
Grade my dealThe exact things to verify before you offer, plus this quarter's market report. Sent to your inbox.
By entering your email you agree to receive the resources plus occasional DealGauge emails, and to our Privacy Policy. Unsubscribe anytime.
Many buy-and-hold investors target 8% or higher, but the right number depends on your market and what else you could do with the money. Compare it to a simpler, safer alternative before deciding.
Most DSCR lenders look for about 1.20 to 1.25 or higher. Below 1.0, the property does not cover its own loan, and you should expect worse terms or a decline.
As a starting point, vacancy 5 to 8%, maintenance 8 to 10%, capital expenditures 8 to 10%, and management 8 to 10% of rent. Over time, total operating costs often land near half of the rent.
Only as a quick screen. At 2026 rates it rarely holds, so use it to decide what to analyze, not what to buy.
The DealGauge Investor Toolkit adds a five-year projection, after-tax cash flow, IRR, a BRRRR planner, a short-term vs long-term model, and a portfolio tracker. Own it once, no subscription.
See the toolkitGeneral information and educational content only, not investment, tax, or legal advice. Benchmarks are rules of thumb, not guarantees. Verify every figure and consult a qualified professional before purchasing any property.