name: rental-underwriting\ndescription: \"Analyze a residential rental property as an investment — 1-4 unit single-family / duplex / triplex / quadplex, condo, townhome. Triggers: \"rental analysis\", \"rental underwriting\", \"cap rate calculator\", \"BRRRR\", \"DSCR loan\".\"\nversion: \"1.0.1\"\ncategory: analysis\nplatforms:
\nYou analyze a residential rental property end-to-end — from listing screen to deal-go/no-go memo. Output is a working financial model (Python or Excel) that an investor can rerun with their own assumptions, plus a one-page deal memo summarizing the math.
\nRecovery:
\nPurchase Price $X\n+ Closing Costs (2-3% buyer) $X\n+ Initial Rehab Budget $X\n+ Holding Costs (rehab period × $/mo) $X\n+ Lease-up / Reserves $X\n= Total Cash Invested (All-In Basis) $X\n\nIf financed:\n Down Payment $X (purchase × DP%)\n Loan Amount $X\n Cash to Close = DP + Closing + Points + Initial Rehab + Holding + Reserves\nVALIDATION: Cash to close ≤ user's available capital. If not, surface gap.
\nGross Potential Rent $X (sum of monthly rents × 12)\nLess: Vacancy & Credit Loss ($X) (5-10% typical, lower for Section 8)\n= Effective Gross Income $X\n\nOperating Expenses:\n Property Tax $X\n Insurance $X\n HOA / Condo Fee $X\n Utilities (LL portion) $X\n Repairs & Maintenance $X (8-12% of EGI common rule of thumb)\n Property Management $X (8-10% of collected rent)\n Lawn / Snow / Pool $X\n Reserves (CapEx) $X (5-10% of EGI to fund roofs, HVAC, water heaters)\n Other $X\n= Total Operating Expenses $X\n\nNet Operating Income (NOI) $X\nLess: Annual Debt Service $X\n= Cash Flow Before Tax $X\nVALIDATION: Expense ratio plausible (35-50% of EGI for SFR; 40-55% for small multifamily).
\nCompute and label all of:
\n| Metric | \nFormula | \n2026 Target | \n
|---|---|---|
| Gross Rent Multiplier (GRM) | \nPurchase Price / Annual Gross Rent | \n< 10 = good, > 15 = thin | \n
| Cap Rate | \nNOI / Purchase Price | \nA: 4-6% / B: 6-8% / C: 8-12% | \n
| Cash-on-Cash Return | \nAnnual CF Before Tax / Total Cash Invested | \n8-12% target | \n
| DSCR | \nNOI / Annual Debt Service | \nDSCR lenders want ≥ 1.25 | \n
| Debt Yield | \nNOI / Loan Amount | \n≥ 10% typical lender ask | \n
| Cap Rate vs Loan Constant | \nCap Rate - Loan Constant | \nPositive = positive leverage | \n
| Break-even Occupancy | \n(OpEx + Debt Service) / GPR | \n< 80% is comfortable | \n
| Total ROI Year 1 | \n(CF + Principal Paydown + Appreciation) / Cash Invested | \n12-25% with leverage | \n
| 1% Rule | \nMonthly Rent / Purchase Price | \n≥ 1% (HCOL-area exception) | \n
| 2% Rule | \nSame | \n≥ 2% (low-cost market screen) | \n
Also project 10-year IRR with assumptions: rent growth (default 3% annual), expense growth (3%), appreciation (3-4%), exit cap rate (entry +25-50 bps).
\nVALIDATION: All metrics computed without div-by-zero. Negative leverage flagged.
\nIf strategy = BRRRR, compute the refinance event explicitly:
\nAfter-Repair Value (ARV) $X (comp-based)\n× LTV (cash-out) 75-80%\n= New Loan Amount $X\nLess: Existing Loan Payoff ($X)\nLess: Refi Closing Costs ($X)\n= Cash Out at Refi $X\n\nCash Invested After Refi:\n Original Cash Invested $X\n Less: Cash Out at Refi ($X)\n = Net Cash Left In $X (target ≤ original DP, ideally $0 — \"infinite return\")\n\nPost-refi monthly cash flow:\n NOI $X\n - New Debt Service $X\n = Cash Flow $X (must be positive)\nVALIDATION: New debt service supportable by NOI (DSCR ≥ 1.20 post-refi). If \"net cash left in\" > original DP, BRRRR didn't work as designed — surface for user review.
\nFor affordable housing investors, run a side-by-side:
\nMarket Rent Scenario Section 8 (HCV) Scenario\n----------------- -----------------------\nRent: $1,800/mo HUD Fair Market Rent: $1,650/mo (HCV cap)\nVacancy: 8% Vacancy: 3% (waitlist demand)\nLate/non-payment: 3% Late/non-payment: 0.5% (HUD direct deposit)\nTurnover cost: $1,500 Turnover cost: $1,200 (longer tenancy)\nInspection cost: $0 Inspection cost: HQS annual + bi-annual\nMarketing: $300/turnover Marketing: PHA waitlist (zero)\nOutput side-by-side Year-1 cash flow comparison. Section 8 often outperforms despite lower headline rent due to stability + low vacancy.
\nVALIDATION: HCV FMR pulled from HUD's official table by zip + bedroom count.
\nGenerate deal_memo.md:
# Deal Memo — {Address}\n\n**Strategy:** {LTR/STR/BRRRR/S8} \n**Purchase Price:** $X \n**All-in Basis:** $X \n**ARV / Stabilized Value:** $X\n\n## Returns\n\n- Cap Rate: X.X% (target {min} for {class})\n- Cash-on-Cash: X.X% (target 8-12%)\n- DSCR: X.XX (lender minimum 1.25)\n- Year-1 Total ROI: XX% (incl. appreciation + paydown)\n- 10-yr IRR: XX%\n\n## Strengths\n\n-\n\n## Risks\n\n-\n\n## Recommendation\n\n- [ ] Buy\n- [ ] Pass\n- [ ] Buy at lower price ($X max)\n- [ ] Need more diligence (specify)\nVALIDATION: Memo fits on one page. Metrics tie to the proforma.
\nCommon gap: forgetting reserves (CapEx for roof, HVAC, water heaters). Real numbers, not aspirational.
\n~/.claude/skills/rental-underwriting/LEARNINGS.md — what worked / awkward / patch / verdict.