How to quickly evaluate real estate listings with key metrics

Evaluating a real estate investment used to mean hours of spreadsheet work. You would punch numbers into formulas, cross-reference market data, and still wonder if you missed something important. For every property worth analyzing, there were dozens that should have been filtered out in the first five minutes.

CrescoRealty solves this by calculating all the metrics that matter instantly. Enter a property once, and you immediately see whether a deal deserves deeper analysis or should be passed over.

The problem with traditional property analysis

Most investors face the same frustrating workflow when evaluating rental properties:

1. Find a listing that looks promising
2. Open a spreadsheet or calculator
3. Manually enter purchase price, rent, expenses
4. Calculate one or two metrics
5. Realize you forgot something important
6. Start over or give up

This process is slow, error-prone, and exhausting. When you are reviewing dozens of listings, the mental overhead adds up fast. Worse, you might pass on good deals because you did not have time to analyze them properly.

A better approach to property screening

CrescoRealty takes a different approach. Enter a property once, and the system calculates every relevant metric instantly. You see all the numbers you need to make a decision without switching between tools or building formulas.

This lets you scan a property in seconds. If the numbers do not work, move on. If everything looks solid, it deserves deeper analysis.

Quick screening metrics for instant decisions

The fastest way to filter properties is with quick screening metrics. These simple ratios tell you immediately whether a property is worth your time.

The 1% rule

The 1% rule states that monthly rent should equal or exceed 1% of the purchase price. A $250,000 property should rent for at least $2,500 per month to pass.

In CrescoRealty, you will see either PASS or FAIL for this metric. A property renting for $2,500/month on a $250,000 purchase price shows PASS because rent equals exactly 1% of the purchase price. A property renting for $1,800/month on a $300,000 purchase price shows FAIL because $1,800 is only 0.6% of the price.

Properties that fail the 1% rule can still work in appreciating markets or with below-market purchase prices. Use this as a first filter, not a final verdict.

The 2% rule

The 2% rule shows monthly rent as a percentage of purchase price. Unlike the 1% rule, this gives you a specific number to work with.

How to read it: A property showing 1% means monthly rent equals exactly 1% of purchase price. A property showing 0.6% indicates rent is well below the 1% threshold.

• 1.5% or higher: Strong cash flow potential
• 1.0% to 1.5%: Acceptable in most markets
• Below 1.0%: Likely tight or negative cash flow

For example, a $250,000 property with $2,500/month rent shows 1%. A $300,000 property with $1,800/month rent shows 0.6%, signaling weak rent relative to price.

The 50% rule

The 50% rule estimates your cash flow by assuming half of gross rent covers operating expenses. The result shows your estimated monthly cash flow after expenses and mortgage.

How to read it: The 50% rule often shows negative values because it uses a conservative expense estimate. A value like -$547 means the property may be tight on cash flow under conservative assumptions. A more negative number like -$747 indicates the property will likely struggle to cash flow.

The 50% rule is a rough estimate. Your actual cash flow with real expense data is often better than the 50% rule suggests, so use it as a quick filter rather than a final verdict.

Cash flow metrics

Cash flow

Cash flow shows your actual monthly profit after all expenses, mortgage payment, and vacancy allowance.

How to read it: This is the money that hits your bank account each month. A property showing $353 means you pocket $353 monthly after everything is paid. A property showing -$27 is losing money every month, even if just barely.

Positive cash flow is the goal for most rental investors. Even modest positive cash flow like $200-500/month adds up over time and provides a buffer for unexpected repairs.

CoC ROI (Cash-on-Cash Return)

Cash-on-cash ROI measures your annual cash return divided by the total cash you invested.

How to read it: A 6% CoC ROI means for every $100,000 you invested, you earn $6,000 per year in cash flow. A 0% indicates you are breaking even with no return on your cash invested.

• 10% or higher: Generally considered strong by many investors
• 6% to 10%: Common range in many markets
• Below 6%: Lower returns that some investors may find insufficient
• Negative: Indicates a loss on cash invested

Cap rate

Cap rate (capitalization rate) shows your return if you paid all cash, calculated as net operating income divided by purchase price.

How to read it: An 8% cap rate means the property generates 8% of its purchase price in annual net income. A 6% cap rate means moderate income relative to price.

• 7% or higher: Often indicates higher income relative to price
• 5% to 7%: Common in many balanced markets
• Below 5%: May rely more on appreciation than cash flow

Cap rate removes financing from the equation, letting you compare properties purely on their income potential.

IRR (Internal Rate of Return)

IRR projects your total annualized return over a holding period, accounting for cash flow, appreciation, loan paydown, and eventual sale.

How to read it: A 16% IRR means your investment grows at 16% annually when you factor in everything, including selling the property later. A 9% IRR is acceptable but relies more on appreciation than cash flow.

• 12% or higher: Generally considered strong total return
• 8% to 12%: Common target range for many investors
• Below 8%: Some investors compare this to stock market historical averages

IRR is the most complete picture of returns, but it relies on assumptions about appreciation and when you sell.

DCR (Debt Coverage Ratio)

DCR shows whether your rental income covers your debt payments, calculated as net operating income divided by annual debt service.

How to read it: A DCR of 1.28 means your income is 128% of your debt payments, leaving a 28% cushion. A DCR of 0.98 means income just barely misses covering debt.

• 1.25 or higher: Often required by commercial lenders
• 1.0 to 1.25: Tight margin with less room for error
• Below 1.0: Income does not fully cover debt payments

Most commercial lenders require DCR of 1.2 or higher to approve a loan.

Risk assessment metrics

LTV (Loan-to-Value)

LTV shows how much of the property value you are borrowing.

How to read it: An LTV of 75% means you borrowed 75% of the property value and put 25% down. An LTV of 80% means you put 20% down.

• 75% or below: Conservative, more equity cushion
• 75% to 85%: Moderate leverage
• Above 85%: Aggressive, less room for value drops

Lower LTV means more of your own money invested but also more protection if property values decline.

Break-even ratio

Break-even ratio shows what percentage of potential rent you need to collect to cover all expenses and debt.

How to read it: A break-even of 71% means you need 71% occupancy to cover costs, leaving room for some vacancy. A break-even of 89% means you need nearly full occupancy to cover costs.

• 75% or below: More room to absorb vacancies
• 75% to 85%: Less margin for vacancy
• Above 85%: Very tight, little room for vacancy
• Above 100%: Indicates negative cash flow even at full occupancy

Operating expense ratio

Operating expense ratio shows what percentage of gross rent goes to operating expenses (excluding mortgage).

How to read it: A 20% operating expense ratio is very efficient, meaning only 20% of rent covers expenses. A 24% ratio is still good, leaving more of the rent available for mortgage and profit.

• 40% or below: Lower expense burden
• 40% to 60%: Common range for many rentals
• Above 60%: Higher expense burden relative to income

Older properties, those with included utilities, or properties with high taxes and insurance tend to show higher ratios.

Gross rent multiplier

Monthly GRM

Monthly GRM shows how many months of rent equal the purchase price.

How to read it: A Monthly GRM of 125 means it takes 125 months (about 10 years) of gross rent to equal the purchase price. A GRM of 156 means about 13 years.

• 100 or below: Higher rent relative to price
• 100 to 150: Common range
• Above 150: Lower rent relative to price

Annual GRM

Annual GRM uses yearly rent instead of monthly.

How to read it: An Annual GRM of 10.4 means the purchase price is 10.4 times the annual rent. A GRM of 13 means 13 times annual rent.

• 10 or below: Higher rent relative to price
• 10 to 15: Common range
• Above 15: Lower rent relative to price

Lower GRM means faster theoretical payback from rent alone.

Comparing two properties side by side

Looking at real numbers helps illustrate how to use these metrics together.

Property A: Solid Cash Flow Deal ($250,000 purchase, $2,000/month rent)

• Cash Flow: $353/month positive
• CoC ROI: 6%
• Cap Rate: 8%
• IRR: 16%
• DCR: 1.28
• 50% Rule: -$547
• LTV: 75%
• Break-even: 71%
• Operating Expense Ratio: 20%
• 2% Rule: 1%
• 1% Rule: FAIL
• Monthly GRM: 125
• Annual GRM: 10.4

Interpretation: This property shows positive cash flow at $353/month. The 6% CoC ROI falls within a common range, and the 16% IRR suggests potential for returns when factoring in appreciation. The 8% cap rate indicates relatively higher income relative to price. DCR of 1.28 would typically satisfy most lenders. Break-even at 71% leaves some room for vacancy. Even though the 1% rule shows FAIL (rent is 0.8% of price), the calculated cash flow is positive based on the inputs provided.

Property B: Break-Even Deal ($250,000 purchase, $1,600/month rent)

• Cash Flow: -$27/month negative
• CoC ROI: 0%
• Cap Rate: 6%
• IRR: 9%
• DCR: 0.98
• 50% Rule: -$747
• LTV: 75%
• Break-even: 89%
• Operating Expense Ratio: 24%
• 2% Rule: 1%
• 1% Rule: FAIL
• Monthly GRM: 156.3
• Annual GRM: 13.0

Interpretation: This property shows a small negative cash flow of $27/month. The 0% CoC ROI indicates no return on cash invested from operations. DCR at 0.98 means rent just barely misses covering the debt. Break-even at 89% leaves little room for vacancy. The 9% IRR relies more heavily on appreciation assumptions. Some investors might look for ways to improve the numbers, such as negotiating a lower price or finding higher rent potential.

What makes the difference?

Both properties are the same price with the same down payment, interest rate, and loan term. The only difference is $400/month in rent.

Property A collects $2,000/month while Property B only gets $1,600/month. That $400 difference flips cash flow from positive $353 to negative $27, drops CoC ROI from 6% to 0%, and pushes break-even from a comfortable 71% to a tight 89%.

This is why screening matters. A small difference in rent dramatically changes whether a deal works.

Strategy-aware calculations

Different investment strategies require different analysis approaches. CrescoRealty adapts calculations based on your strategy.

Rental strategy

For buy-and-hold rentals, the focus is on cash flow, appreciation over time, and building equity. Key metrics include monthly cash flow, CoC ROI, and 5-year projections.

BRRRR strategy

Buy, Rehab, Rent, Refinance, Repeat strategies require analyzing the full cycle. This includes after-repair value, refinance potential, and capital recovery timeline.

Tax-aware analysis

Real estate offers significant tax advantages that affect true returns.

Depreciation

Residential properties depreciate over 27.5 years, creating paper losses that offset rental income. A $200,000 building (excluding land) provides roughly $7,273 in annual depreciation deductions.

Cash flow vs taxable income

Positive cash flow with negative taxable income is possible and common. Depreciation often creates tax losses even on profitable properties.

Frequently asked questions

How accurate are quick screening metrics like the 1% rule?

Quick screening metrics are designed to filter, not finalize. A property passing the 1% rule might still have hidden problems. A property failing might work in high-appreciation markets. Use these for initial filtering, then dig deeper on promising candidates.

What is more important, cap rate or cash-on-cash return?

Cap rate shows the property's intrinsic return regardless of financing. Cash-on-cash shows your actual return on invested capital. Both matter. High cap rate with poor financing still beats low cap rate with great financing if you are comparing where to deploy your money.

Should I only invest in properties with perfect metrics?

No. Properties with perfect metrics across the board are rare and competitive. Understanding which metrics matter most for your goals helps you identify opportunities others miss. A higher break-even ratio might be acceptable if the property has strong upside potential.

How do I account for future rent increases?

CrescoRealty projects returns over a 5-year horizon including estimated appreciation. You can adjust assumptions to model different scenarios and see how they affect IRR and long-term returns.

What metrics matter most for cash flow investors?

Focus on monthly cash flow, cash-on-cash ROI, DCR, and break-even ratio. These tell you whether the property will put money in your pocket each month and how resilient it is to vacancies.

Try it yourself

CrescoRealty calculates these metrics automatically so you can spend less time on spreadsheets. Enter a property once and see all the numbers in one place.

Want to try it out? Get started and explore how these metrics look for properties you are considering.