More than 36% of households rent places to live instead of owning homes. That means that more than one-third of households need rental properties, which is good news for landlords.
You'll have many duties if you're a landlord, including setting the correct prices for each unit. Additionally, you'll need to compare the expenses to the rental income to determine if the property is a wise investment.
The solution is through a rental analysis.
Keep reading this guide to learn what this is and the steps required to complete one.
What Is a Rental Analysis?
Buying rental properties is a business that many people enter, as it's a great way to earn money. However, your profitability relies on collecting as much rental income as possible.
One way to collect more rent is by selecting great tenants who pay on time every month. Another way is by charging the correct amount for rent.
Conducting a rent analysis is the best way to determine how much to charge for your units. Determining the correct rental pricing takes time and effort, but it's vital for your rental property business.
Additionally, a rental analysis helps you compare your cost in an investment property to the income you can earn from it. As a result, you'll determine if you have a profitable property.
You can use a rental analysis before purchasing a property or after buying one.
What Steps Does It Require?
The simplest way to conduct an investment property analysis is through a net income evaluation. Net income refers to the difference between your costs and rental income.
To complete the analysis, you'll need to know two primary things: your costs and rental income.
First, you can add up the total expenses you'll have for the year with the property. Secondly, you can determine the rental rates to see how much rental income to expect for the year.
Next, you can subtract the expenses from the projected rental revenue to see the answer. If the answer is positive, you have a positive net income for the property. A negative answer is a negative net income.
Analyzing an investment property also requires several other steps. One step is assessing the property's condition.
For example, what work does the property need? Will it need work now or in a few years? You'll want to factor this information into your assessment when analyzing a property.
Additionally, you might want to carefully consider the expected rental revenue from each unit by comparing similar rental properties in the area. This ensures that you use the correct rental rates in your analysis.
Hire a Property Manager for Help
Running a rental analysis tells you how much to charge for your rental units, but this is just one of many duties you have as a landlord. If you're experiencing challenges running your business, you might need some help.
Contact us at HomeRiver Group in Northern Virginia for help. We offer property management services and would love to hear from you.
