Rental Property Investment Analysis
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Rental property investment analysis is an essential tool on today’s market for beginners and seasoned investors. This timely process will help you stay informed, up to date and keep you on the right track for making the best investment decisions. Here are the main areas of consideration for a rental property investment analysis:
Type of investment = Return time
Depending on the type of property deal you have made will tell you when you can expect to recoup any monies you have had to put into your property, say repairs or upgrades. In some cases the property is in excellent shape and you did not have to spend anything, this is optimum as you can start making money on your investment right away. However, just because you had to put money in a property doesn’t mean you cannot recoup it in a timely manner.
Net and gross; like any business you have your gross profits and your net profits. Gross is everything you take in, net is what is left after all obligations have been taken care of. This should be easy to calculate on a rental property and word of caution-look at the NET yield as this is your monthly income. If you go by the gross yield, then you will be counting on money that you do not have.
Even to Profit:
Even to profit means how long it will take you to go from breaking even to recouping your initial investment. You must also take into consideration any monies that were put in above the investment. For instance, a new roof was needed, well, that becomes part of your investment because it keeps the building viable so add that cost to your time frame.
Depending where your rental property is your rental prices have to cover your mortgage payment. This is calculated on a percentage basis and is best achieved by checking with your lender and being aware of what other rents are in the area. 130% is not uncommon but 150% while difficult in today’s market can be achieved.