Real Estate Investing Guide
Everything you need to analyze rental properties like a pro — from first-time investor basics to the metrics Wall Street uses.
Getting Started
Why Rental Property?
- Cash flow — monthly income after all expenses
- Appreciation — property values trend upward over time
- Tax benefits — depreciation, mortgage interest deductions
- Leverage — control a $1M asset with $200K
- Inflation hedge — rents and values rise with inflation
The Investment Analysis Process
- 1. Screen — filter by price, location, property type
- 2. Estimate rent — our proprietary model analyzes comps and market data
- 3. Run the numbers — cashflow, cap rate, CoC, DSCR
- 4. Compare — side-by-side across neighborhoods
- 5. Decide — grade properties A through D, focus on the best
Key Assumptions That Matter Most
- Down payment % — 20% is standard; lower means PMI
- Interest rate — even 0.5% swings change cashflow by $100+/mo
- Vacancy rate — 8% is conservative for San Diego
- Property management — 10% of rent if not self-managing
- Maintenance & CapEx — 1% of value + 5% of rent for reserves
Key Metrics
Click any metric to read the full explainer with formulas, examples, and how Prop2Profit calculates it.
Investment Score & Grade
The 0–100 score and the A–D letter — what the grade ranks, and why an "A" is not a promise of cashflow.
Cap Rate
Capitalization rate measures unlevered return. Learn when it matters and when it misleads.
Cash-on-Cash Return
How much cash your actual invested dollars earn each year, after debt service.
DSCR
Debt Service Coverage Ratio — the metric lenders care about most.
Net Operating Income
The foundation of every valuation model. Revenue minus operating expenses.
Price-to-Rent Ratio
Quick screen for buy-vs-rent economics. Lower is better for investors.
IRR
Internal Rate of Return — the time-weighted total return including appreciation and equity.
Gross Rent Multiplier
A fast "napkin math" metric to compare properties before deep analysis.
San Diego Market
High-level market snapshot. Explore individual zips with live analytics on the Neighborhoods page.
Median Home Price
~$950K
Varies widely by zip
Avg Rent (3BR)
~$3,200/mo
Coastal areas higher
Vacancy Rate
~5%
Below national avg
Population Growth
+0.8%/yr
Steady demand driver
Why San Diego for Investors?
- Strong military & biotech employment base
- Constrained supply — limited buildable land
- Year-round tourism supports STR demand
- UC San Diego drives rental demand in North County
- Historical appreciation: ~5-7% annually
- Below-average vacancy rates
- Diverse economy reduces downturn risk
- Prop 13 caps property tax increases at 2%/yr
Investment Strategies
Buy & Hold (Long-Term Rental)
Pros
- Steady monthly cashflow
- Equity builds via mortgage paydown
- Appreciation over 5-10+ year horizon
- Tax advantages (depreciation)
Cons
- Capital intensive (20% down)
- Tenant & maintenance hassles
- Illiquid — selling takes months
Best for: Investors seeking passive income and long-term wealth
House Hacking
Pros
- Live in one unit, rent the others
- FHA/VA loans allow 3.5-0% down
- Dramatically reduces living expenses
- Build landlord experience with training wheels
Cons
- Must live on-site
- Limited to 1-4 unit properties
- Owner-occupied rules for 1 year
Best for: First-time investors who want to start with minimal capital
BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
Pros
- Recycle capital for multiple properties
- Forced appreciation through renovation
- Higher returns than turnkey
Cons
- Rehab risk & cost overruns
- Requires contractor network
- Refinance depends on appraisal
Best for: Experienced investors comfortable with renovation projects
Value-Add Multifamily
Pros
- Economies of scale (more doors)
- Value based on NOI, not comps
- Potential for rent bumps post-renovation
Cons
- Higher barrier to entry
- Commercial lending is different
- Management complexity
Best for: Investors ready to scale beyond single-family
Ready to Run the Numbers?
Browse live San Diego MLS listings with instant investment analysis.