How do I know if the Property I'm buying is a good investment

Question

Hi All,

I'm new to real estate investing and could really use some guidance.

My spouse and I are in the process of looking for our first rental property. We've been working with a real estate agent who's a friend. She's kind and has been showing us homes, but I'm starting to realize she may not have much experience when it comes to analyzing property investment.

So far, we've been the ones finding the properties ourselves and then asking her to schedule showings. There hasn't been a time when she's sent us a curated list based on the criteria we gave her - things like budget, rental income, or STR zoning. It's made us wonder if we need someone more proactive and experienced with investment properties.

We're getting serious about buying and want to make sure we're making a smart financial decision. I feel torn - I don't want to hurt our friend's feelings, but I also know this is a big investment and I want someone with more expertise in evaluating cash flow, appreciation potential, neighborhood comps, etc.

I've been using AIRDNA to get a sense of short-term rental performance, and the confidence score on the property is showing as "medium". I'm not sure how reliable that is - are there other platforms or tools the team can recommend to confirm the potential performance before we commit to purchasing?

A few questions I'd appreciate help with:

- What key things should I look at to know if a property is a good rental investment?

- Are there better tools than AirDnA, or should I just trust the confidence scores?

- Should I consider working with an agent who has more experience with investment properties, or try to stick with our current agent and get advice elsewhere?

- How can I handle this situation respectfully if we do decide to switch?

Thanks in advance - this is our first investment and i really appreciate the insight from this community

Drew Sygit · Answer

@Mylo Lor At least 95% of agents do NOT know how to work with investors!

Investors even need to be careful of agents claiming they are, "investor friendly" because most of them are actually only "commission friendly" :(

Why?

Because agents are trained for, and most only deal with, owner-occupied transactions - which are highly emotionally based sales processes.

Do you own the home you currently live in?

If so, what numbers did you analyze when you bought it?- High probability you only cared about the monthly payment and if you could afford it!

The ONLY value the agent you are working with will provide is property access and writing offers.

They are NOT equiped to:

1) Identify potential rentals to make offers on- They have no idea what makes a good rental location or property

2) Analyze properties to determine how much to offer- No clue how to calculate ROI, Cash-on-Cash, etc.- They will not want to write lowball offers to make the numbers work!

3) Properly handle a tenant-occupied purchase- No clue on including proper clauses in a purchase offer!

So, you will either have to figure all this out on your own and just use the agent for showings and writing offers or find an agent that actually knows how to work with investors.

Aisha Umar · Answer

Hi Mylo,

You’re asking all the right questions and it’s clear you’re taking this seriously, which is the best mindset for a first-time investor. Let’s break this down:

1. How to Know if a Property Is a Good Rental Investment

Focus on the core numbers:

• Cash Flow: Monthly income minus all expenses (mortgage, taxes, insurance, repairs, management, utilities).
• Cap Rate: Net Operating Income ÷ Purchase Price. Good cap rates vary by market, but aim for at least 5–6%+.
• Cash-on-Cash Return: (Annual Cash Flow ÷ Total Cash Invested) × 100.
• Occupancy Rates & STR Rules: Make sure STR (short-term rental) is allowed by local zoning laws and HOA rules.
• Neighborhood Trends: Look at local comps, job growth, population trends, and property appreciation.

Cash Flow: Monthly income minus all expenses (mortgage, taxes, insurance, repairs, management, utilities).

Cap Rate: Net Operating Income ÷ Purchase Price. Good cap rates vary by market, but aim for at least 5–6%+.

Cash-on-Cash Return: (Annual Cash Flow ÷ Total Cash Invested) × 100.

Occupancy Rates & STR Rules: Make sure STR (short-term rental) is allowed by local zoning laws and HOA rules.

Neighborhood Trends: Look at local comps, job growth, population trends, and property appreciation.

2. AirDNA Confidence Scores & Alternatives

• AirDNA is useful, but don’t rely on the confidence score alone. Look at:


Occupancy rate


Average nightly rate (ADR)


Revenue potential vs. comps
• Occupancy rate
• Average nightly rate (ADR)
• Revenue potential vs. comps
• If the score is “medium,” verify the data:


Is it pulling from similar properties (bed/bath, amenities, location)?


Look at individual property performance in the “Rentalizer” tool.
• Is it pulling from similar properties (bed/bath, amenities, location)?
• Look at individual property performance in the “Rentalizer” tool.

AirDNA is useful, but don’t rely on the confidence score alone. Look at:

• Occupancy rate
• Average nightly rate (ADR)
• Revenue potential vs. comps

Occupancy rate

Average nightly rate (ADR)

Revenue potential vs. comps

If the score is “medium,” verify the data:

• Is it pulling from similar properties (bed/bath, amenities, location)?
• Look at individual property performance in the “Rentalizer” tool.

Is it pulling from similar properties (bed/bath, amenities, location)?

Look at individual property performance in the “Rentalizer” tool.

Other tools to cross-check:

• Mashvisor – For STR and traditional rental analytics.
• Rabbu – STR projections with visuals and financial models.
• Furnished Finder / Airbnb actual listings – Manually check what hosts are charging and how booked they are.

Mashvisor – For STR and traditional rental analytics.

Rabbu – STR projections with visuals and financial models.

Furnished Finder / Airbnb actual listings – Manually check what hosts are charging and how booked they are.

3. Should You Switch Agents?

You’re absolutely not wrong to want an agent who understands investor needs. A good investment-focused agent will:

• Send pre-screened properties that meet your financial goals.
• Know STR regulations, neighborhood rents, and repair costs.
• Help model returns and future value.

Send pre-screened properties that meet your financial goals.

Know STR regulations, neighborhood rents, and repair costs.

Help model returns and future value.

If your current agent is great personally but not professionally aligned with your goals, here are two respectful options:

• Keep her as your “buying agent” but bring in a mentor, deal analyst, or coach for property analysis.
• Or say something like:
“We’ve really appreciated your help and want to be fully transparent—since we’re looking for an investment property, we may also consult with someone who specializes in investment deals to make sure we’re making the right call. We value our friendship and didn’t want to do this behind your back.”

Keep her as your “buying agent” but bring in a mentor, deal analyst, or coach for property analysis.

Or say something like:
“We’ve really appreciated your help and want to be fully transparent—since we’re looking for an investment property, we may also consult with someone who specializes in investment deals to make sure we’re making the right call. We value our friendship and didn’t want to do this behind your back.”

Final Advice for First-Time STR Investors:

• Always run the numbers conservatively (assume lower income, higher expenses).
• Check local laws and any changes coming for STR ordinances.
• Don’t fall in love with a property fall in love with the numbers.

Always run the numbers conservatively (assume lower income, higher expenses).

Check local laws and any changes coming for STR ordinances.

Don’t fall in love with a property fall in love with the numbers.

Aristotle Kumpis · Answer

Hey Mylo. My recommendation would be to buy a long term rental for your first property. It's a lot easier and more simpler than getting into the hospitality business. I know several people that bought STR's for their first property and ended up selling it just a few years later. If you are trying to get more cash flow than a long term rental, consider a multi family property instead.

What if your STR doesn't bring in the income that you want? Can you turn that property into a LTR and still break even? That is something to consider.

Regarding your agent, most agents have never owned a rental property. That doesn't mean they are not a good agent though. It will be up to you to make sure the numbers work out. Yes, it is helpful if they personally have experience with owning rentals. But as an investor, you will be the one that needs to do your research. You could also see if there any vacation property managers in the area. They not only manage, but they usually also sell. That could be another place to seek some help.

Bryce Jamison · Answer

I don't trust AirDNA. It can scrape Airbnb and VRBO data, but how can it capture direct bookings which I'd guess are 25% or more of bookings. Estimating STR income is one of the most challenging things I've done in REI. The best methods I've used are the "enemy method" and finding other operators in the area to see how much they're making. You can also call the local property management companies to get rental estimates, but they're incentivized to over estimate. We used "Short Term Rental Long Term Wealth" by Avery Carl to get started.

If you have a more qualified realtor, yes you should use them. This is business. I have lots of friends that I love too, but not enough to potentially loose out on tens of thousands of dollars. To be fair, have you asked her for a curated listed with the numbers, or is it an unspoken expectation? I'd ask her first and see if she can deliver. Honestly though, I'd lower my expectation for your realtor a lot. I'll save the tirade against realtors (I am one) for another post.

Finally, an STR for your first investment is definitely starting on hard mode. Not a day goes by without us either checking in/out a guest, talking to cleaners, other vendors, or advertising our STR. I've spent less than an hour a month the last several years on our LTR.

Denise Supplee · Answer

@Mylo Lor Great to meet you here on BP and welcome to the world of real estate investing! You're definitely not alone in this, and it's totally normal to feel a little stuck at this stage.

Working with a friend as your agent can get tricky, especially when it comes to investments. Many traditional residential agents are fantastic at helping people find a primary home, but they may not have the background or mindset for analyzing deals strictly as investments. If you're doing most of the legwork and still not feeling confident in the numbers, it’s a sign that you may need someone more aligned with your goals

Here are some tools you could use for help with analyzing: Mashvisor, Pricelabs’ Market Dashboards, or Rabbu.

When you're evaluating a rental property, it's important to estimate the cash flow, meaning making sure your rental income will cover all your expenses (mortgage, taxes, insurance, maintenance, management fees, etc., accounting for all expenses, and still leave you with a profit each month. Also consider the neighborhood…look at things like rental demand, vacancy rates, and potential appreciation. Make sure the home’s condition and systems roof, HVAC, etc. won’t hit you with surprises, and think about your exit strategy in case you ever want to refinance, sell, or convert it.

As for your question about switching agents, One approach might be to thank your agent for her help and let her know you’re realizing you may need someone with more investment experience for this specific purchase. You can say something like, “We really appreciate everything you’ve done for us and value your time and support. As we get more serious about investing, we’re learning we might need someone to help us with this specific niche.” hope that helps, if you ever have any other questions or would like to connect feel free to reach out 🙂

Zach Berry · Answer

Mylo - congrats to you and your wife for having the courage to take next steps. We use AirDNA income projections in our DSCR loans for STRs. If that's your goal, and you're underwriting them via AirDNA there may be some alignment. Feel free to reach out if I can be helpful.

Nicholas L. · Answer

@Mylo Lor

so, you have a lot of overlapping things going on in your post.  i guess i am confused mostly by your first question: "What key things should I look at to know if a property is a good rental investment?"

that is very, very broad.  are you asking only in the context of short term rentals?  or, do you want something that might work as both an STR and an LTR?  what research have you done?  how many markets are you looking in?  why do you want to invest in STRs?  no one is going to present you a gift-wrapped, perfect STR that is just sitting on the MLS waiting for you to buy it.

you got great feedback from @Bryce Jamison - a short term rental is a huge undertaking especially with so much saturation in so many markets.

maybe you can provide more information to help BP help you.

Micah White · Answer

That is a sticky situation with your agent, and I've been there! In my experience it's best to be honest and voice that you're looking to partner with someone that know investment real estate. At the end of the day, it's nothing personal!

Micah White · Answer

This is awesome, Mylo! Congrats to you both! I'd be happy to help you guys get up to speed on real estate underwriting. Running the numbers accurately is key!

How do I know if the Property I'm buying is a good investment

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