How to Conduct a Rental Analysis

How to Conduct a Rental Analysis

Any time you invest money into something, whether a car, a house, or a business, you want to ensure it's a good deal. That's why you need to conduct a rental analysis to verify whether a property you want to buy will yield a great return. 

Set criteria for your investments before you begin your search for investment properties. A property can have everything a renter wants, but if it doesn't yield the right return, it's not the perfect investment for you. 

When investing in real estate, there are many things to consider, such as accepting Section 8 vouchers. Are you hiring a full-service property management company? The amount to charge for security deposits and other lease terms.

Continue reading to learn more about conducting a rental analysis to ensure you're on the right track.

Understand Why You Need a Rental Analysis

When you purchase a property intending to rent it out, you'll need to take out a mortgage. Before the bank agrees to a loan, they must ensure you can afford the mortgage. A rental analysis will give a clear picture of whether this is a sound investment. 

The monthly rent must cover the mortgage payment, insurance, taxes, and property maintenance. For rent by owner properties are risky because if the tenant has a financial hardship, they will break the lease and move.

You may also risk getting a bad tenant, and now you must incur the additional cost of evictions. 

Check Out the Neighborhood

You need to check out the neighborhood where you want to buy the rental unit. Put yourself in the renter's shoes and consider what you would look for in a great neighborhood. 

  • Great schools
  • Local parks
  • Access to highways
  • Proximity to restaurants
  • Good neighbors

Unless you're renting to retirees, these are popular items people consider when looking for a rental property.

List the Positives vs. Negatives

Every home has its positives and negatives. When conducting a rental analysis, weigh them both because you don't want to end up with a money pit

Positives include an excellent structure, updated HVAC, plumbing, and electrical, and there are no liens on the property.

Negatives will include the condition and location of the neighborhood. Research crime statistics like robberies, drug arrests, and loitering.  

Research Comparable Rental Units

You can work with a realtor or utilize real estate sites to gain information about rental properties. Look for information on square footage, the number of bedrooms and bathrooms, and lot size. 

Your rental analysis should also include rental valuation for the neighborhood. Check public records to determine the area's number of foreclosures and rental evictions. 

Hire a Property Manager

A proper rental analysis will help you make a sound investment.

The next step is to find a property management company that's right for you. You want a company that handles tenant placement and rent collections. They can also take the stress out of evictions.

Property investors in Oklahoma City have a trusted property management partner in the HomeRiver Group. Click here for your FREE rental analysis.

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