Analyzing a rental property deal starts with building a realistic income and expense picture, not just relying on the listing's advertised numbers, which are sometimes optimistic. Start with market rent — verified through comparable rental listings, not just the current or previous owner's stated rent — since existing rent may be below or above true market rate. From gross rental income, subtract realistic operating expenses: property taxes, insurance, a vacancy allowance (commonly 5-8% of gross rent), maintenance reserves (often 1-2% of property value annually), and property management costs if you won't self-manage, to arrive at Net Operating Income. From NOI, calculate cap rate (NOI divided by purchase price) to compare the deal against similar properties in the same market, giving you a sense of whether the pricing is reasonable relative to comparable opportunities. Then calculate cash-on-cash return, factoring in your actual financing structure — down payment, loan terms, and resulting mortgage payment — to understand your actual cash return on the capital you're putting into the deal, which is often more directly relevant to your personal investment decision than cap rate alone. Beyond the numbers, stress-test your assumptions against less favorable scenarios — what does the deal look like with higher vacancy than expected, a major unexpected repair, or a period of below-market rent while finding a new tenant? A deal that only works under best-case assumptions carries more risk than one that still performs reasonably under more conservative assumptions. It's also worth evaluating qualitative factors alongside the financial analysis — the property's location and its trajectory (improving, stable, or declining), the condition of major systems and their likely remaining useful life, and the general rental demand characteristics of the specific submarket. A property with strong numbers on paper but weak underlying market fundamentals, or vice versa, both carry risks that pure financial analysis alone won't fully capture, which is why local market knowledge from an experienced investor-focused agent adds real value beyond the spreadsheet analysis.