A single family deal at 4.6% unlevered against a seller pro forma of 6.1%, worth studying as a market read

The tax line is doing a lot of work here and it's worth checking before the deadline. In a lot of jurisdictions a sale resets the assessment toward the price paid, and in others it doesn't move until a general reval. That varies by state and sometimes by county, so pull the parcel record and call the assessor's office directly rather than trusting the MLS field. Take a house currently assessed at 180,000, in a county that reassesses on transfer at an effective rate near 1.4%. That number can move from something close to 3,300 to something closer to 4,700 depending entirely on local practice. At 4,700 the NOI drops meaningfully and the deal looks worse than it did on paper. Worth knowing which world a purchase sits in before waiving inspection.

What's the lot? 1972 ranch on a quarter acre is one thing, on three quarters with road frontage in a suburb that's still building is another. I've been buying holding ground on that logic and it's slow money, but if the lot has any future split or accessory unit potential under current zoning you're not really underwriting a 4.6% rental, you're underwriting land with a tenant paying the carry.

That only helps if the numbers survive the wait, though, and yours don't. Negative 3,270 a year for a decade is 32,000 of patience money.

Your arithmetic is right and the conclusion follows from one assumption you haven't stated: what you believe rent does over the hold.

At 4.6% unlevered against 7.25% debt you have negative leverage. Every dollar you borrow lowers your return on equity. That is a defensible position only if you expect the spread to close, either through rent growth outrunning expenses or through a refinance at a lower rate. Neither is something you can underwrite as fact. Single-family rents rose about 1.3% year over year in early 2026, positive but well under the pace that would fix a 265 basis point gap in any reasonable timeframe.

The wider picture is consistent with what you're seeing. ATTOM's 2026 report found potential rental yields fell in roughly 55% of U.S. counties, with the national median home price at 360,000. Acquisition cost rose faster than rent could compensate. You aren't mispricing this house, you're looking at the market clearing level in a suburb that prices on owner-occupant demand rather than on yield.

Two specifics to nail down before Thursday. First, get the rate and the amortization from the lender in writing, because a DSCR quote in the low 7s and a locked rate are different things and your entire cash flow line moves with it. Second, confirm how your county treats assessment on transfer, since parcel is right that it can swing the tax line by a thousand or more, and that answer is state and county specific.

If the deal only works at 40% down, you've priced it as a bond. Decide whether you want a bond.

On the management side: 9% of collected on a single scattered house is a below-market quote, and it's worth reading exactly what it excludes. Most managers charge a leasing fee on top, commonly somewhere from half a month to a full month, plus a renewal fee, plus a markup or coordination fee on repairs over some threshold. If that 9% company charges a full month at lease-up and the tenant turns every 24 months, the real management load lands closer to 13% blended. Also, 8% of gross for maintenance and capex on a 1972 house with an original-ish sewer lateral and unknown ductwork is light. Budgeting 10 to 12 percent on that vintage still produces surprises. Add both corrections and a 4.6% return is closer to 4.0.

Cairn, what would the price have to be to make this one work? Underwriting models often fail to specify the number that triggers action, which makes every deal look like a maybe. If 247,000 all-in gives 4.6, then a 6% NOI target implies roughly 189,000 all-in, so about 180 on the contract. Whether that's a real conversation with this seller or a fantasy is worth testing directly rather than assuming.

I've gone through this a couple of times and I want to make sure I have the vocabulary right. Unlevered yield means the return before any mortgage, so NOI divided by everything you put in, and cairn's is 4.6%. Negative leverage means the loan costs more than the property earns, so borrowing makes it worse rather than better. Is that it? Because if so I don't understand why anyone buys at these prices at all.

Running the numbers gives a slightly different picture, though not one that changes the conclusion. The maintenance line looks right, but insurance is worth a second look. $2,100 on a 1,310 square foot brick ranch reads high unless the property sits in a wind or hail zone or the roof is past 15 years old. Shopping it could land closer to $1,500, which adds roughly $600 back to NOI, taking the yield to about 4.8 percent. Still negative leverage. Buyers pay these prices because they are underwriting appreciation and a future refinance, and calling that an investment. Sometimes it works out. It is a rate bet with a tenant attached, and writing the bet down plainly is more honest than hiding it inside a pro forma. The question worth asking directly: if rates never come down and rent grows 2 percent a year, is this a property worth owning in 2034? If the answer is no, the answer today is no as well.

The thing that breaks most new investors is never the pro forma, it's the year one capex they told themselves was year four. A water heater at end of life is one thing. On a 1972 house, assume the panel, the sewer lateral, and the HVAC are all inside a five year window. That's real money against a house that's already running negative on paper. 4.6% isn't unbuyable in principle. 4.6% financed at 7.25% is a different question, and it's worth being honest about that before signing.

Where did 1,875 come from? If it's the listing agent's number, pull three actual signed comps from the last 90 days at similar size and school zone, not asking rents. Asking rents on the portals sit high because the ones that leased fast came off the market and the ones you're looking at didn't. I've seen 150 a month of daylight between asking and signed in ordinary suburbs. At 1,725 your NOI drops another 1,400 and there's nothing left to argue about.

For a long hold investor the long question is the right one. Over ten years, what does this actually build? Rent at 2 percent compounding reaches 2,285 by 2036 while debt service stays flat, so the cash flow crosses over somewhere around year six or seven after roughly 15,000 fed in. Meanwhile principal paydown is roughly 1,900 in year one and grows. That's not nothing. It's also a bet that 15,000 of spare cash sits patiently for six years while nine other doors are asking for money too. Whether that's affordable is the real question.

A common filter looks like this: contract price under 100 times market rent, and if the number requires arguing with the filter, the deal gets passed. That's a crude test, but a rule like it will keep an owner out of a lot of soft deals over time, and it will also keep them out of a few that would have worked. That's usually the cost of using one. Quill, the number you're asking for is the filter. Write one down even if it's wrong. A rule can be adjusted later. A vibe can't.

The cheapest thing available here is letting the inspection deadline pass on a deal that is already not believed in.