Rental Property Due-Diligence Checklist (12-Point)
Targeted question: What should you check before buying a U.S. rental property?
Short answer: Run 12 checks: Cap Rate ≥ 6%, Cash-on-Cash ≥ 8%, rent comps within 0.5 mi, 6–12 month rent trend, property tax history, insurance quote, HOA/CDD fees, title history, inspection, appraisal gap, flood zone, tenant/lease status.
- Confirm Cap Rate ≥ 6%. Pull the listing’s Cap Rate. Reject anything below 6% unless the market is appreciation-driven (Class A urban) or the deal is a clear value-add.
- Confirm Cash-on-Cash ≥ 8%. Using your actual down payment and interest rate, Cash-on-Cash should clear 8% for a buy-and-hold single-family rental.
- Pull 5+ rent comparables within 0.5 miles. Same bed/bath count, built within 10 years, square footage within ±15%. Median rent-per-sqft × your sqft = market rent.
- Check the 6–12 month rent trend. Rising trend is a green flag; flat is neutral; declining is a red flag unless offset by other metrics.
- Review 5 years of property tax history. Watch for recent reassessments. In FL, GA and TX taxes can jump 20–40% after sale.
- Obtain a real insurance quote. In FL, HI, LA, CA, insurance can double the listed estimate. Get a real quote before you commit.
- Verify HOA / CDD / COA fees and reserves. Request the current HOA financials and reserve study. Underfunded reserves = future assessments.
- Run a title search. Check for liens, easements, unpermitted work and boundary issues. Vera Title runs this in 3–5 business days.
- Schedule a licensed home inspection. Budget $400–$700. Ask for roof age, HVAC age, electrical panel, plumbing, and water intrusion.
- Plan for the appraisal gap. Prepare 3–5% of purchase price as appraisal-gap reserve if buying in a competitive market.
- Check the flood zone & climate risk. FEMA flood zone A or V adds $1,500–$4,000/yr insurance. First Street climate risk reports are free and useful.
- Review tenant and lease status. If tenant-occupied, request the current lease, payment history and security deposit. If vacant, budget 1–2 months vacancy.
What should you check before buying a U.S. rental property?
Use this 12-point checklist before you sign the purchase contract. Any item that fails should either kill the deal or force a price renegotiation.
How to use this checklist
Run items 1–4 inside VeraFinder in under 5 minutes. Items 5–12 are the physical and legal due-diligence phase — plan for 10–14 days from accepted offer to clear-to-close.
When to walk away
Walk away if any two of the following are true:
- Cap Rate below 4% in a non-appreciation market
- Insurance quote 2x+ the listing estimate (coastal FL, coastal LA, wildfire zones in CA)
- HOA with negative reserves and pending special assessments
- Inspection reveals foundation, roof structure or termite damage > $15,000
Download the companion worksheet in the Investment Finder or run the raw numbers in the Cap Rate calculator.