Top 6 Ways to Analyze Real Estate Deals

Real estate is one of the most popular investment forms for its stability and ability to edge inflation. However, it is a capital-intensive venture, and without the right tools to analyze your business, you could struggle to break even.

Maintaining a healthy relationship with your tenants, optimizing your website, and writing a solid lease can help your rental business succeed. But if you can’t keep track of the correct figures, you won’t be able to maximize its potential. So whether you’re a newbie looking to start right, or a long-term investor that wants to brush up on your analysis skills, this article is perfect for you. Here are the top 6 ways to analyze real estate deals:

6 Ways to Analyze Real Estate Deals

Property Income

One of the most straightforward ways to analyze an investment deal is to measure the property income. This refers to the gross income a landlord earns on a rental. In other words, it’s the total annual rent you receive from your tenants. But, of course, to attain an accurate figure, you must subtract the amount of money you lost in vacancies.

Net Operating Income

We can’t talk about how to analyze investment properties without mentioning net operating income. Alternatively known as NOI, it is the amount of profit left after you take away your operating costs. It is a measure of the profitability of your business.

Thus, we can say NOI = Gross income – Operating costs

Your operating costs should account for mortgage repayments, advertising, travel fees, repairs, and maintenance.

Cash-on-Cash Return

Cash-on-cash return (COC) is a good measure of your property’s ROI. It compares your annual cash flow with the invested amount. It’s more common amongst commercial property owners but still applies to residential property. For example, you can use it to assess the cash yield on a recent upgrade.

COC return = Pre-tax NOI/Amount you paid for the property

Capitalization Rate

Capitalization rate is a real estate tool for comparing different property investments. It’s commonly applied when investors are considering whether or not to buy a property and would like to assess its worth with figures. Typically, the higher the cap rate, the more reward the owner stands to acquire. Although, it could also imply taking higher risks.

Cap Rate = NOI/Purchase Price

Internal Rate of Return

The internal rate of a return is a metric to estimate how much money a property will generate in the future. Investors primarily use it to compare the profit of their new unit to that of previous investments.

It’s not easy to calculate IRR manually, which is why most property owners use an online calculator or an excel spreadsheet. But we can summarize it as follows:

IRR = (Future Profit – Current Profit)/Current Profit x 100%

Return on Investment (ROI)

Return on investment is a financial metric to measure the performance of a rental property. It represents the gain or loss of your investment as a ratio to its purchase cost. It’s often used hand-in-hand with the IRR to measure profitability. For example, if you make an upgrade such as installing a new deck, you’d want to know how much profit you’re making. Thus, to calculate your ROI, you would use the formula:

ROI = (New Value – Old Value ) / Old Value x 100%

Factors that Affect ROI

Property Location

Location is a crucial factor that affects ROI. Other things like amenities, neighborhood value, and walkability score all revolve around where your rental property is. The more access a house has to jobs, restaurants, parks, and other services, the more desirable it becomes. Thus, tenants are often willing to pay more to live in such places. As a result, the property owners can charge higher rent and their investments tend to appreciate faster.

Latest Upgrades

Another factor that influences ROI is upgrades. Newer updates are always in high demand amongst tenants, and landlords with the latest tools attract higher-paying applicants. Thus, investing in upgrades that make your home more modern might be worthwhile. For example, smart thermostats, hubs, and lights are inexpensive technologies that can make your property more attractive. Besides, they can also save you money by improving the efficiency of your house.

Improved Security

Security is often a high priority for renters and should be for you too. Areas with lower crime rates are often more expensive than their crime-riddled counterparts because they would gladly trade money for safety. Besides choosing the right location, you can invest in external security measures to protect your house. Smart locks, cameras, and state-of-the-art surveillance systems can significantly boost your ROI.

The Economy

Finally, the economy plays a significant role in the value of real estate. Like every other industry, when markets are down, so are rental property prices. Since the seasonality of the economy might not be in your hands, your best bet is to stay abreast of market trends. With the latest updates, you can better protect yourself against downturns before they happen.

Online Tools that can Help

As you can see, many factors can affect ROI, and it can be challenging to track these numbers. Even for the best math student, keeping up with these complex calculations can be challenging. Hence, it would be best to utilize tools to analyze real estate deals. Here are some great online tools that can help:


DealCheck is one of the most popular tools on our list. You can use it for many rental types, including BRRRs, fixer-uppers, and multi-family units. Another plus is that its software is compatible with android and apple ios so that you can use it on your device. That feature gives users the luxury of using it anywhere, anytime.


Another excellent analysis tool that can help is Trulia. Besides keeping track of the correct figures, they have other calculators that can help you make decisions using today’s mortgage rates. In addition, their rich database can help you assess and compare properties throughout the US. It’s also a great real estate listing site with extensive details, photos, and reviews on different neighborhoods around the country.


Mashvisor is an all-encompassing tool that helps property owners with virtually every calculation. With it, you can accurately estimate your cash-on-cash return, net operating income, and cap rate. It can also help you determine other rates like occupancy and price-to-rent ratio.

If you have a tight budget, you’ll love With them, price doesn’t have to be a barrier to getting the figures you need. In addition, they have tools to help you analyze your property with the latest mortgage rates. They’re also synced with other websites like Zillow and HotPads so that you can access extensive information about the current rental market.


Every landlord needs to have a good grasp of their investment’s performance. Without it, you’re prone to make bad financial decisions that could cost your business. Instead, you should periodically use these top 6 ways to analyze real estate deals before making big decisions. Better estimates can help you make better decisions regarding your rental properties, maximize their potential, and earn more profit.

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