Why A Good Detailed Rental Analysis Matters And How To Spot One
What is a rental analysis?
A rental analysis is a comprehensive overview of the state of your rental property and how it fits into the current rental market. This analysis provides you with insight into how your property is performing and what kind of rent you should be charging your tenants.
While rental analyses are typically performed on a property that an investor already owns, they can also be conducted before purchasing a property. When you conduct a rental analysis before purchasing a property, it will provide you with the research needed to make an educated decision about what property to buy and where.
When conducting a rental analysis, it’s important to consider all monthly and annual expenses, so that you can be sure to get the highest possible return on investment. It’s best to analyze at least three other similar properties in an area or neighborhood in order to fully understand the state of the market.
Why is a rental analysis important
One of the most important things for any investor is getting a high return on investment that allows you to earn a steady, reliable income.
A rental analysis will allow you to determine a fair price to charge your tenants, while still earning a high income that covers the costs that come with owning the property. It’s important to note that the rental rate you charge determines whether your property will be a success.
If you underprice your rental units, you will be left with a vacant property that is generating little to no profits. On the other hand, charging too little for rent means you may not be earning enough to cover the costs of the property, such as taxes, insurance, HOA payments, and more.
What is included in a good rental analysis?
There are several key areas to examine when conducting a rental analysis:
In-depth income and expenses analysis: It’s important to accurately estimate the monthly and annual costs of your property. During this step of the analysis, you need to consider the rental price as well. This allows you to see what properties are generating profits and a high return.
Local market trends: The location of your rental properties is one of the most significant factors to estimate your rental rates. A property that is located in a stagnant or declining area will not produce as high of a return as a similar property in a growing area. Some of the most important factors that you should look for are the walkability score, schools, public transportation, and local attractions.
Local rental competition: Once you’ve examined the neighborhood of your rental property, it;s time to look at comparable properties in the same area. Similar properties in the same neighborhood allow you to get a reasonable rent price estimate. Along with the neighborhood, it’s important to also ensure that these properties share other similarities such as number of bedrooms and bathrooms, square footage, condition of the property, and proximity to parks and schools.
The best price for your rental property: Investors typically estimate rent prices based on square footage. While square footage is a key element to look at when determining the rental price, it’s also important to keep in mind community and apartment amenities as well as the condition of your rental property, such as the age and any renovations or updates. For example, if apartment A has a renovated kitchen and apartment B does not, you cannot charge the same rate for these two units.
Contact us for your FREE detailed rental analysis so you know how much your rental is worth in today's hot rental market!