BiggerPockets Real Estate Podcast
Episode: 6 Numbers You Need to Know Before Buying a Rental Property
Date: February 25, 2026
Hosts: Dave Meyer & Henry Washington

Episode Overview

In this practical, number-crunching episode, Dave Meyer and Henry Washington break down the “6 Numbers You Need to Know Before Buying a Rental Property.” With years of experience analyzing thousands of real estate deals, Dave and Henry stress the importance of math—not speculation—in smart investing. Through candid conversation, examples, and actionable advice, they detail the core metrics and calculations every investor should master to avoid costly mistakes and build long-term wealth.

Key Numbers Covered

1. Current Value (As-Is Value)

• Definition: The actual market value of the property today—not the list price.
• Why It Matters: Protects you from overpaying and helps buffer against market declines.
• Calculating Current Value:
  • Professional appraisal (accurate, but costs money)
  • Comparable sales (“comps”) via a skilled real estate agent—be sure comps reflect similar condition, finish, and features.
• Memorable Quote:

  “List price has nothing to do with what the value of the property actually is. …What a property is listed for is just what someone thinks and or wants the property to sell for. It does not mean that that is the current value of the property.”
  — Henry [02:10]

2. Equity

• Definition: Value of the property minus liabilities (usually your mortgage).
• Why It Matters: Core wealth-building metric; provides a financial buffer and opens refinancing or selling opportunities.
• Walking Into Equity:
  Buy below market value to “walk into” immediate equity, or create it through renovations (forced appreciation).
• Memorable Quote:

  “This is the most important real estate financial metric in my opinion.”
  — Henry [07:14]
  “Equity is the nest egg…this is how you really build wealth in real estate.”
  — Dave [07:36]

3. After Repair Value (ARV)

• Definition: Estimated market value after planned upgrades or renovations.
• Why It Matters: Drives offer prices, profitability, and is critical for flips and BRRRR strategies.
• Best Practices:
  • Analyze recent, comparable sales of renovated properties.
  • Be conservative; don’t assume you’ll hit the highest sale in the comps.
  • Ask agents for the middle-to-low end of the ARV range.
• Memorable Quotes:

  “ARV is the number I need to know to make sure I don’t screw [equity] up.”
  — Henry [14:23]
  “If you assume a property’s ARV is higher than it actually turns out to be, you can go from profitable to in the hole…real fast.”
  — Henry [15:17]

4. Rent Comps

• Definition: The realistic, achievable rent you can charge—verified by local comparable rentals.
• Why It Matters: Immediate income and performance metric; impacts cash flow and project viability.
• How to Use:
  • Use conservative estimates; discount agent projections by 10–20% to account for market softness, vacancy, or overzealous projections.
  • Include vacancy rates in your analysis.
• Memorable Quotes:

  “It means that I take whatever an agent or property manager tells me and then I discount it by like 20%.”
  — Dave [19:46]
  “This is a place where a lot of new real estate investors lose profitability.”
  — Henry [20:41]

5. Holding Costs

• Definition: All recurring expenses during ownership: mortgage/debt service, property taxes, insurance, utilities, maintenance, capital expenditures, vacancy, and management.
• For Flippers:
  • Watch for high-interest hard/private money.
  • Underestimate repair time and you’ll pay for it in extra months of debt service and lost profits.
  • Utilities are often forgotten.
  • Pro Tip: Double your estimated timeline if you’re a beginner.
• For Rental Investors:
  • Holding costs go beyond mortgage; include vacancy, repairs, management—even if you self-manage now.
  • Budget more for older or less-renovated properties.
• Memorable Quotes:

  “They say, ‘Oh, my rents are higher than my mortgage payment, I’m making money.’ That drives me insane.”
  — Dave [28:01]
  “Vacancy to me is the killer because most people… don’t budget enough vacancy.”
  — Henry [29:27]

6. Cash Flow & Cash on Cash Return

• Cash Flow:
  • Net profit: all income (rents, fees) minus every single expense (including vacancy and reserves).
  • Cash flow alone doesn’t indicate overall return quality; it needs context.
• Cash on Cash Return:
  • The efficiency ratio: annual cash flow divided by how much cash you invested.
  • Key metric for comparing deals, setting income goals, and measuring investment “efficiency.”
• Memorable Quotes:

  “What I don’t like is people like, I want $200 a month per unit. What does that mean? Did you invest $10 million to make $200 a month? That’s a terrible deal. Did you invest 10 grand to make $200 a month? That’s a great deal.”
  — Dave [32:41]
  “Cash flow is a measure of success…what it doesn’t tell me is how profitable that deal really is.”
  — Henry [34:11]

Key Timestamps

• 00:00 — Opening and purpose of the episode
• 01:59 — #1: Current Value explained
• 06:05 — #2: Equity and the power of “walking into equity”
• 14:23 — #3: After Repair Value (ARV) and its pitfalls
• 18:30 — #4: Rent Comps and how to get conservative numbers
• 25:12 — #5: Holding Costs—don’t overlook them
• 32:01 — #6/#6.5: Calculating Cash Flow & Cash on Cash Return
• 35:56 — Summary: Master these numbers before buying

Practical Insights & Guidance

• Don’t Speculate—Calculate:
  Both hosts emphasize: Investing is a numbers game, not a vibes game. Stick to the math and use conservative assumptions.

• Always Assume More Time and More Expenses:
  Especially for new investors—double your repair timelines and increase your vacancy and repair budgets for real-world surprises.

• Don’t Rely on Others’ Numbers:
  Do your own comps, get second opinions, and always verify all numbers independently.

• Efficiency Over Absolutes:
  Focus less on “magic” cash flow amounts per property and more on the ratio and efficiency of your invested capital.

Notable Quotes & Moments

• On Current Value vs. List Price:

  “List price has nothing to do with what the value of the property actually is.” — Henry [02:10]

• On ‘Vibes’ in Real Estate:

  “People make decisions about properties on vibes, but there is a vibes element of current value… That’s why Zestimate doesn’t work that well, right?” — Dave [04:44]

• On Walking into Equity:

  “I have never, ever, ever bought a deal that I didn’t walk into equity on day one.” — Henry [07:14]

• On the Dangers of Overestimating ARV:

  “If you assume a property’s ARV is higher than it actually turns out to be, you can go from profitable to in the hole…real fast.” — Henry [15:17]

• On Overestimating Rent:

  “If you tell me you’re going to rent it for 1600, I’m going to be like, well, if there’s a bad month, I want to be able to … rent it for 1400 and still make money.” — Dave [20:00]

• On Cash Flow vs. Return:

  “I want $200 a month per unit. What does that mean? Did you invest $10 million to make $200 a month? That’s a terrible deal.” — Dave [32:41]

Conclusion: Master the Six & a Half Numbers!

• Mastering these six (plus) numbers will keep you safe, profitable, and confident in your deals.
• Don’t buy unless you understand and believe in your numbers.
• For more, check out Dave’s book Real Estate by the Numbers and use the BiggerPockets calculators.

Resource Tips:

• Book: “Real Estate by the Numbers” by Dave Meyer
• Tool: BiggerPockets Calculators (PRO Membership recommended)

End Quote:

“If you don’t feel confident about these numbers, don’t buy that deal. ...These six numbers are what you need to know about every deal. Everything else is kind of gravy.” — Dave Meyer [35:57]