Investment Property Evaluation Checklist

Define the objective and property

The analysis must reflect the strategy.

• Define the property’s lawful demand segment, intended use, lease structure, relevant property characteristics, hold period, income goal, renovation plan, management approach, and exit scenario.
• Identify location, condition, rental demand, restrictions, financing fit, and the work required to execute the plan.

Build the acquisition budget

Include the cash required before the property stabilizes.

• Record purchase price, down payment, lender fees, closing costs, inspections, immediate repairs, capital improvements, carrying costs, and initial reserves.
• Document interest rate, term, amortization, payment, points, and assumptions about refinancing.

Model operations

Use supportable income and complete expenses.

• Estimate rent and other income, then account for vacancy and collection loss.
• Recurring operating expenses may include taxes, insurance, association fees, owner-paid utilities, routine maintenance, management, leasing, lawn, pool, pest, accounting, and other recurring costs.
• Calculate NOI from effective gross income less recurring operating expenses. Model debt service, replacement reserves, and capital expenditures separately to reach before-tax cash flow.

Calculate and test returns

No single measure tells the whole story.

• Calculate effective gross income, net operating income, debt service, before-tax cash flow, cap rate, cash-on-cash return, and debt-service coverage where relevant.
• Test lower rent, higher vacancy, larger repairs, rising taxes or insurance, slower lease-up, and different sale outcomes.

Plan verification and exit

List every assumption that is not yet documented.

• Verify leases, rent roll, expenses, restrictions, condition, permits, insurance, financing, management, and market assumptions through appropriate sources.
• Model expected selling costs, projected loan payoff, net sale proceeds before tax, capital improvements during ownership, resale market, and holding-period risk.
• Ask a CPA or tax adviser to review potential gains and depreciation-related consequences, and state a specific alternate strategy—such as continued rental, a different lease structure, or an earlier sale—rather than writing only “alternative exit.”

Evaluation Worksheet