Every week I analyze deals live with investors in our community, and the same question comes up constantly: what numbers should I plug in? Vacancy, maintenance, CapEx, appreciation, and what counts as a "good enough" return.
After 17+ years and a lot of deals, my underwriting assumptions have settled into a standard set. Here they are, with the reasoning, so you can stop guessing. You can plug them into any deal, or run them fast in my deal analysis calculator.
The goal is balance. You don't want to be so conservative that no deal ever pencils and you miss the property's real potential, but you can't be aggressive either, because the deal has to survive reality, not a spreadsheet fantasy.
My standard assumptions
| Line item | My number | Notes |
|---|---|---|
| Repairs & maintenance | 5% | Don't get cute and cut this |
| CapEx | 5% | Think of it as a savings account for big items |
| Property management | 8 to 10% | Even if you self-manage, underwrite it |
| Vacancy | 5 to 10% | Never 2%. More below |
| Appreciation | 4% | The historic baseline. Underwrite 0% as your floor case |
| Minimum cap rate | 6.25% | On actuals, not proforma |
| Minimum cash-on-cash | ~6% | 8%+ is going to take work to find |
| Minimum DSCR | 1.2 | What lenders need to see |
If you want the full framework behind these numbers, including how I build a buy box first, I laid it all out in how to underwrite a multifamily deal.
Vacancy: physical plus economic
I see investors plug in 2% vacancy, which is about one week a year. That's a fantasy number. Vacancy has to cover physical vacancy (the unit sitting empty between tenants) and economic vacancy (a tenant in place who isn't paying).
For a single family rental in a strong market, 5% is realistic. For small multifamily, I like to start at 10%, and 8% is roughly one month a year. And if your plan involves big rent increases on inherited tenants (say, moving someone from $865 to $1,200), expect first-year vacancy to run higher, because that's a big jump for most tenants and some will leave.
CapEx and repairs: the savings account
Repairs and maintenance stays at 5%. I've watched investors trim it to a few hundred dollars a year to make a deal pencil, and one repair call eats the whole budget.
CapEx works almost like a savings account for the big-ticket items. Around $900 a year accumulates to roughly $4,600 over five years, which is about what an HVAC replacement costs. The building doesn't care that your spreadsheet skipped that line. If you want to size the buffer properly, here's how much cash reserve you should keep per rental property.
One nuance for older buildings: if the major systems (plumbing, electrical, roof, foundation, siding) have been updated, standard 5% and 5% reserves can stand. If they haven't, either budget a renovation and assume you do the work in year one, or raise the reserves. And verify with a couple of property managers either way.
Appreciation: 4% is the baseline
Tracking from the 1980s to today, historic US appreciation runs about 4% a year. If you want a safe baseline, use 4%. Some markets run hotter, but I also like to underwrite at zero appreciation as the floor case, because appreciation sort of matters and sort of doesn't until you actually have an exit event.
Where appreciation shows up is in your total return, which stacks cash-on-cash, principal reduction, and appreciation, all levered against your down payment rather than the full property price. That's why flipping a 4% appreciation assumption on can move total ROI from single digits to 20%+. Know what's driving your number before you fall in love with it.
Cap rate: 6.25% minimum, on actuals
In my opinion, 6.25% should be the minimum cap rate for any deal right now. Even B-class buildings in Phoenix trade around 6.25 to 6.5, so a smaller market should command at least that, arguably more. I go deeper on this in what is a good cap rate for a rental property in 2026.
Two traps here. First, brokers advertise proforma cap rates. Always compute the going-in cap on actual rents and actual expenses. On one duplex we analyzed live, the same building was worth about $275K on proforma rents and closer to $250K on actuals. That gap is your negotiation, or your loss. Second, know your audience: small residential sellers (2-4 units) don't respond to cap rate arguments the way commercial multifamily sellers do.
Cash-on-cash: beat the savings account, then some
Cash-on-cash is just one metric, but here's my benchmark logic: if a high-yield savings account pays around 4.5% for doing nothing, a 3% cash-on-cash on a property that takes real time and effort doesn't compete on income alone. I want to see a minimum of about 6% cash-on-cash right now, and anything close to 8% is going to take some work to find. If you need a refresher on the math, here's how to calculate cash-on-cash return on a rental property.
That said, yield isn't everything. Given a 17% cash-on-cash deal at a $1,025 rent point versus a 12% deal at a $1,350 rent point, I take the 12%. Having done this for 17 years, I'm always going to prioritize a higher paying tenant, because they're less drama. High advertised returns in cheap areas quietly assume you're always collecting rent, and ignore turnovers and make-readies.
Quick estimating tricks
- Insurance: square footage times a per-foot rate gets you close. In a higher-rate area like San Antonio, around $0.60/sq ft, so a 5,000 sq ft fourplex runs roughly $3,000 a year. Then get real quotes.
- Utilities: always verify who pays water and sewer before underwriting a small multifamily. Single meter means you pay it (and typically bill it back). Separate meters mean tenants handle it.
- Seasonal costs: take the annual number (snow removal, landscaping) and stagger it monthly.
These are the same numbers I bring to every live deal review. Set them once, apply them the same way every time, and good deals start separating themselves from the ones that only work on the listing agent's spreadsheet.
This article is for educational purposes only and is not tax, legal, or financial advice. Consult a qualified CPA or tax attorney about your specific situation.
