Investor Checklist: Analyze Any Rental Deal

Evaluating a short-term rental or furnished property investment requires systematic analysis across multiple dimensions—financials, operations, regulations, market dynamics, and physical condition. Missing a critical factor can turn a promising investment into a costly mistake.

This comprehensive checklist provides a framework for analyzing any rental deal, whether you're evaluating a turnkey STR, a corporate housing property, or a conversion opportunity.

Table of Contents

1. Quick Summary
2. Pre-Screening Checklist
3. Financial Analysis Checklist
4. Operational Due Diligence
5. Regulatory and Legal Review
6. Physical Property Inspection
7. How This Affects Investors
8. How This Affects Operators and Sellers
9. Master Investment Checklist
10. Worked Example: Deal Evaluation
11. Common Mistakes to Avoid
12. FAQ

Quick Summary

• Pre-screen quickly on location, regulations, and asking price before deep analysis
• Verify all revenue claims with platform statements, bank records, and occupancy calendars
• Regulatory due diligence is non-negotiable—permits, zoning, and trend direction matter
• Physical inspection should assess STR-specific factors like furnishing condition, not just structure
• Total cash requirement includes down payment, closing, furnishing, startup reserves, and operating float

Pre-Screening Checklist

Quick Pass/Fail Criteria

Before investing analysis time, quickly assess:

Red Flags That Kill Deals Immediately

• STR explicitly prohibited by zoning or HOA
• Active moratorium on new permits
• Seller unable to provide revenue documentation
• Property in flood zone without adequate insurance
• Significant deferred maintenance visible
• Title issues or liens

Financial Analysis Checklist

Revenue Verification

Expense Verification

Investment Metrics

INVESTMENT METRICS

Net Operating Income: $___________
Cap Rate: ___%
Target Cap Rate: ___%
Price Implied by Target Cap: $___________

FINANCING ANALYSIS
Down Payment (___%): $___________
Loan Amount: $___________
Interest Rate: ___%
Monthly P&I: $___________
Annual Debt Service: $___________

CASH FLOW
NOI: $___________
- Debt Service: $___________
= Annual Cash Flow: $___________

CASH REQUIRED
Down Payment: $___________
Closing Costs: $___________
Furnishing (if needed): $___________
Startup Reserves: $___________
Operating Float: $___________
Total Cash Required: $___________

RETURNS
Cash-on-Cash: ___%
DSCR: ___x

Operational Due Diligence

Current Operations Review

Guest Demand Assessment

Regulatory and Legal Review

Regulatory Compliance

Legal Documentation

Physical Property Inspection

Standard Inspection Items

STR-Specific Inspection Items

How This Affects Investors

This checklist serves as your protection:

Before Making Offers:

• Complete pre-screening to avoid wasted effort
• Preliminary financial analysis to establish offer range
• Regulatory research to assess deal viability

During Due Diligence:

• Systematic verification prevents surprises
• Documentation supports negotiation
• Identified issues inform contingencies

Before Closing:

• All checklist items completed
• No unresolved red flags
• Clear path to profitable operation

A marketplace connecting sellers with investors provides structured access to properties with documentation supporting due diligence.

How This Affects Operators and Sellers

For Sellers:

• Understanding buyer checklist helps prepare
• Having documentation ready speeds process
• Proactive disclosure builds trust
• Well-documented properties sell faster

Preparation Tips:

• Compile 24 months of financial records
• Document all operating systems
• Gather permit and regulatory documentation
• Create comprehensive inventory
• Address obvious maintenance items

Master Investment Checklist

Worked Example: Deal Evaluation

Property Overview

• 4BR/3BA house in Destin, FL
• Asking price: $750,000
• Operating as STR for 3 years
• Seller claims $120,000 gross revenue

Pre-Screening (Pass)

• Location: Destin vacation market (strong)
• Regulations: STR permitted with license
• Price: Reasonable for 4BR beachside
• Type: Fits investment criteria

Financial Analysis

Revenue Verification:

• Reviewed 24 months of Airbnb/VRBO statements
• Platform revenue: $108,000 average
• Direct bookings: $12,000 average
• Total verified: $120,000 (matches claim)
• Occupancy: 71%
• ADR: $325

Expense Analysis:

Investment Metrics:

• NOI: $120,000 - $58,420 = $61,580
• Cap Rate: $61,580 / $750,000 = 8.2%
• Down Payment (25%): $187,500
• Debt Service: $44,800/year
• Cash Flow: $16,780
• Cash-on-Cash: 7.4% (on $226,500 total cash)

Regulatory Review

• STR license in place, transferable
• No pending regulatory changes
• Beach community supportive of tourism
• Risk assessment: Low

Physical Inspection Results

• Structure: Good condition
• Roof: 8 years old, good shape
• HVAC: 5 years old, functioning
• Furnishings: Good condition, some replacement needed
• Estimated furnishing refresh: $8,000

Decision

• Metrics meet criteria
• Regulatory risk low
• Property in good condition
• Offer: $725,000 (accounting for furnishing needs)

Common Mistakes to Avoid

1. Skipping pre-screening: Detailed analysis on every property wastes time. Pre-screen to focus efforts.

2. Trusting seller financials without verification: Always verify with primary documents. Trust but verify.

3. Ignoring regulatory trends: Current legality doesn't mean future legality. Research the direction.

4. Overlooking operational complexity: Remote properties in different time zones add management burden.

5. Underestimating transition challenges: New owners often see revenue dip. Budget for ramp-up period.

6. Forgetting total cash requirement: Down payment is just the start. Factor all startup costs.

7. Skipping STR-specific inspection items: Standard inspection misses furnishing condition and guest experience factors.

FAQ

How long should the due diligence period be for STR properties?

Request 30-45 days minimum. STR due diligence requires more verification than traditional properties—platform statements, regulatory research, and operational review take time.

What if the seller can't provide documentation?

Major red flag. No documentation means you can't verify claims. Either walk away or assume worst-case scenario and adjust offer significantly (50%+ discount to claimed revenue).

Should I hire an inspector who knows STRs?

Standard home inspectors cover structural issues. For STR-specific items (furnishing condition, guest experience factors), you can often assess yourself during walkthrough. Some markets have STR-specialized inspectors.

How do I verify a permit is transferable?

Contact the permit-issuing authority directly. Ask specifically if the permit transfers with property sale and what (if any) requirements apply to new owners.

What's a reasonable furnishing replacement budget?

Expect to refresh 20-30% of furnishings when acquiring an operating property. Budget $5,000-15,000 for typical homes, focusing on mattresses, high-traffic furniture, and worn items.

How do I assess regulatory risk when laws are unclear?

Research recent history: any enforcement actions, news articles, city council discussions, pending proposals. Talk to local STR operators. When in doubt, assume stricter regulations are coming.

Should I complete the checklist for every property?

Complete pre-screening for every property. Complete full checklist only for properties that pass pre-screening and are under serious consideration. This preserves your time.

What's the most commonly missed item on this checklist?

Insurance verification. Many sellers have inadequate coverage, and buyers assume existing insurance is sufficient. Always verify that coverage is STR-specific and adequate.

---

Looking for investment-ready properties with documentation? Browse listings on a marketplace connecting sellers with serious investors, or list your property to reach qualified buyers.

Internal Links:

• Underwriting a Short-Term Rental Property
• How to Reduce Vacancy in Furnished Rentals
• Insurance Essentials for Furnished Rentals
• How Corporate Leases Work for Landlords

---

Consult a professional for your specific situation.