What kind of data do you need to gather for doing a rental property analysis, and where can you find it? Investing in rental properties is one of the best ways to generate a steady stream of income that can supplement your main salary in case of part-time investing, or sustain you financially and provide you with enough profits to re-invest and grow your investment portfolio.
However, before purchasing an investment property and generating profits, you will have to do a rental property analysis to maximize your returns and minimize the risk of investing your money in a failed investment.
When it comes to rental property analysis, there are certain pieces of data and info that you will need to gather about each property in order to make sure that your investment will be a profitable one, and that it will allow you to reach the goals that you’re hoping to achieve.
In this article, I will go over the different kinds of data or information that you need to gather in order to conduct a rental property analysis and learn about and plan the future of your investment and finances. I will also be mentioning Mashvisor as a reliable source for getting all the info you need as well as readily available calculations and future estimates that will directly affect the performance of the investment property.
Rental Property Analysis: Basic Property Characteristics & Owner Info
The first thing that you will need to learn about each rental property is the basic characteristics of the property.
These characteristics include the type of property, its age, its size, the number of bedrooms and bathrooms, and its status.
There are several types of investment properties that can be turned into rental properties. So, before doing a rental property analysis, you will want to learn about each property type and whether or not it is what you want to have in the market that you’re investing in.
Property types include single-family homes, multi-family homes, condos, townhomes, luxury homes, apartments, and even mobile homes.
Each of these property types has its own advantages and disadvantages, and some of them might perform much better in certain markets than others. Learning about the optimal property type for your investment strategy can help you maximize your profits and avoid investing your money in a rental property type that isn’t desirable in your market of choice.
Owner info is another aspect that you will want to learn about, and it will give you an idea of the type of tenants that you should expect for the property. By contacting the current owner of the property, you can learn from them some insider info about the property and its best and worst characteristics, as well as the optimal type of people who will want to live in the property based on the owner’s experience.
While these details won’t directly be used in the rental property analysis, they can give you a better idea of what to expect from the property and whether it will perform well as a rental or not.
Related: How to Find Investment Properties Using a Property Finder Tool
Mashvisor Provides:
When it comes to property characteristics and owner info, Mashvisor provides all the necessary pieces of info that you need to get a better idea about the property.
Each property listed on Mashvisor has its own page. At the top of the page, you will find all of this info and much more about the property, including a virtual tour of the property (if it’s available), as well as the tax history of the property (which saves you the trouble of asking the owner about it).
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Rental Property Analysis: Rental Strategy & Calculations
When it comes to rental property analysis, you should expect to do some calculations along the way.
These calculations are the heart and soul of any rental property analysis, and they are the main method for learning about the financial future of your investment.
There are a number of metrics that can be used when doing a rental property analysis to calculate the return on investment that you should expect from investing in each property. These metrics include:
- Cap Rate (Capitalization Rate)
- Cash on Cash Return
- Cash Flow
Additionally, you will need to know what the occupancy rate of the property is. The occupancy rate is the percentage of time during a year that the property is expected to be rented out, and therefore generate a profit.
When it comes to calculating these metrics, there are three main aspects that you will need to be aware of:
- Your financing method (cash vs. mortgage) and amount of down payment
- One-time startup costs and recurring expenses
- The rental income that the property is expected to generate
All of these aspects will be used in the process of calculating the different ROI metrics during any rental property analysis.
Related: What Rental Strategy to Choose: Airbnb vs Renting Out Traditionally?
Mashvisor Provides:
Luckily, Mashvisor’s platform specializes in these metrics and analytics, and it provides you with a rental property calculator that includes all of these elements for you to easily calculate the return on investment of your property.
Not only that, but the calculator will give you results for both rental strategies (short-term rentals & long-term rentals) so that you can choose the optimal rental strategy for you or the one that has the highest potential for profits.
Of course, although these calculators come with pre-calculated values based on the area’s average expenses and occupancy rate, you can easily modify the values and customize the results based on your own preferences and the actual costs and expenses that will incur.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Rental Property Analysis: Rental Comps & Recent Sales
Another major part of data gathering for conducting a rental property analysis is collecting data for rental comps and previous sales of similar properties.
Once you’ve done the calculations for the rental property analysis you’re interested in, you will want to see how the results fair against the average performance of that market.
This is where rental comps become more relevant. Although rental comps can also be used during the process of searching for investment properties or identifying a few that match your investment goals and search criteria, they can also be used after you’ve done your rental property analysis to determine the results more accurately.
By looking at rental comps, you will be looking at properties that are similar to yours and that are located in the same area, allowing you to see which properties are performing above or below the area’s averages in order to identify the one that is most suitable for you.
Looking at recent sales can also give you a better idea of the price that you can negotiate and the amount of money that you will be paying for the purchase of the investment property. This is because some properties might be listed at a certain price, but might sell at lower or higher than the listing price. This will give you an idea of whether you will be paying more or less than the price that the property is listed at, which can also help you predict the floor and roof of your return on investment.
Related: Finding and Understanding Rental Comps Made Easy
Mashvisor Provides:
Mashvisor provides the user with two tables for rental comps as well as recent sales of similar properties from its databases.
These tables can give the user a better idea of where this property stands when compared with other similar properties in the area, and whether the price of the property is seller-friendly or buyer-friendly, giving a deeper understanding of the market as well as the future performance of the property.
The tables come in an easy-to-read straightforward format that any real estate investor can use and understand, and they can be switched between both rental strategies to gain a better idea of the optimal rental strategy to use.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
Bottom Line
When it comes to rental property analysis, no platform does it better than Mashvisor. The scale of the analytics provided by Mashvisor, the wide range of tools and features, and the inclusion and comparison of both rental strategies all make for an all-purpose workbench for real estate investors to use for all aspects related to investing in rental properties.
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