What’s your “minimum deal standard” in today’s market?

Question

Serious question for the investors in here.

With rates where they are and sellers still anchored to 2021 pricing… what’s your minimum standard before you even consider writing an offer?

For example:• Minimum cash on cash return?• Specific rent to price ratio?• Value add required?• Equity spread day one?

I’ve been walking properties lately trying to look at everything through an investor lens, and I’m noticing a lot of deals only make sense if appreciation saves them.

Curious how you’re underwriting right now.

Are you buying for long term hold, short term reposition, or sitting on the sidelines?

Bo Smith · Answer

You're asking the right question because 2026 has actually forced people to get honest about their minimums. I'm underwriting for boring cash flow first, appreciation never. If a deal doesn't work with no appreciation and rates staying elevated, I'm not writing the check.

My personal minimums: 8-10% cap rate on stabilized rentals, cash-on-cash return of at least 12% year one, and enough spread that a 10% property cost increase doesn't kill the deal. On a flip, I need 20-25% profit after all hard costs, which means my initial offer needs to leave serious room. If comps are 00k and I'm buying at 40k, I know I have cushion. At 20k? Pass and wait.

The trap everyone's falling into right now is the appreciation prayer -- banking on the market bouncing back to 2021 prices. Sellers are still anchored there, and you can feel the market resistance. The deals that actually make sense day one are the ones targeting cash flow, not lottery tickets. You've got to do the boring math: actual rents in your market minus property taxes, insurance, maintenance, capex, and get real about your vacancy rates. Don't use numbers from investor Facebook groups -- call property managers and ask what they're actually seeing. Are you looking for long-hold rentals or repositioning plays?

Marc Winter · Answer

If one is using appreciation to save a deal, they're not buying an investment; they're buying a lottery ticket.

Minimum deal criteria of 6% net after all expenses and reserves, including Capex, management, vacancy, piti, etc.

Not saying it's easy today, but without a better return than Bonds, why bother?

Bo Smith · Answer

You're asking exactly the right question. The deals that only work with appreciation are the ones that bite you when the market shifts. I've seen it happen twice now -- people buy on hope, market stalls, and suddenly they're underwater with negative cash flow.

My minimums in this market: For rentals, 0.8% rent-to-price ratio minimum on day one, but I stress test to 7-8% vacancy and 10-15% maintenance. Cash on cash return needs to be 6%+ after debt service and reserves. For flips, I need 15-20% margin after all carrying costs, and I'm buying with the assumption the market goes sideways. If it does and I only break even, that's acceptable. Any appreciation is a bonus.

Equity spread matters less to me than margin on flips. You can have day-one equity and lose money on the deal if your rehab runs long or the sale takes too long. The margin is what actually protects you.

Right now I'm mostly sitting on the sidelines for primary rentals because the math doesn't work in most markets. For flips, I'm still active but only in markets where I have local contractors and buyers on speed dial -- that's the only way you control timeline risk.

What market are you in, and are you underwriting for a hold or a repositioning?

What’s your “minimum deal standard” in today’s market?

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