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Wondering how successful real estate investors evaluate potential rental properties? In this transparent, no-nonsense breakdown, Cole—a part-time real estate investor balancing a career as both a commercial airline pilot and military instructor pilot—reveals his six-point property evaluation system built from years of hands-on experience.

Cash flow reigns supreme in Cole's investment approach. Forget complex appreciation models or speculative metrics—he focuses exclusively on cash-on-cash return, aiming for approximately 25% when possible. This straightforward calculation (annual pre-tax cash flow divided by total cash invested) immediately reveals how hard your money is working for you.

Unit configuration significantly impacts investment performance, with Cole strongly preferring two and three-bedroom units that attract stable, long-term tenants. Property condition assessment follows a practical hierarchy based on replacement costs, while property tax considerations—often overlooked by new investors—can dramatically affect long-term profitability. Cole shares a cautionary tale of selling a property primarily because its $6,000 annual tax burden consumed the majority of its cash flow potential.

Beyond the numbers, Cole dives into neighborhood dynamics and tenant profiles, drawing from his unique perspective gained while working as a mail carrier throughout Milwaukee. He explains how AppFolio property management software standardizes his tenant screening process, helping avoid costly mistakes like the tenant who stopped paying for 16 months during COVID and ultimately removed the kitchen cabinets when leaving.

Whether you're considering your first investment property or looking to refine your existing portfolio strategy, these practical criteria will help you evaluate opportunities through the eyes of an experienced investor. What's your most important criterion when evaluating rental properties?