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What’s Included in a Rental Property Analysis?

Andrew L. Propst - Tuesday, January 11, 2022
Property Management Blog

Idaho is a great place to invest in property. But still, that doesn't mean that every single potential rental property is a winner. So, how can you make sure you're making a sound investment that will yield healthy returns?

Simple. You conduct a rental property analysis. If you're new to the world of real estate investing, or you're unfamiliar with the ins and outs of rental property analysis, then this guide will tell you everything you need to know. Read on to learn how and why you should conduct a rental property investment analysis on any real estate you're considering purchasing.

What Is a Rental Property Analysis?

As the name suggests, a rental property analysis is a way of looking at different aspects of a potential property to see how much money it could make you. There are a number of different factors that need to be taken into account to get a full picture of a property's earning power.

First, it's important to note that a rental property can make you money in two different ways. It can help you to build equity, and it can generate cash flow. Most investors focus on the latter, but the former is important to keep in mind, also.

A property's cash flow is calculated by taking the rent it will bring in, and then subtracting potential expenses from that amount. It's important not to underestimate the expenses involved in running a rental property, as this can cause you to overinflate a property's earning potential.

Some possible expenses include your mortgage, utilities, homeowners’ association fees, and pest control/general maintenance. You'll also need to estimate your possible vacancy vs occupancy rates. To do this, you should consider the way the market is behaving in your chosen area.

Next, you'll need to calculate how much rent you can reasonably charge. Again, you can look to the market, as well as other similar properties for guidance. Overestimating the rent you can change is another way to shortchange yourself in the long run.

Look at the property's location, its condition, and the amenities available. You should also think about whether you want to operate short-term or long-term lets.

Once you've added up all your expenses, and calculated the rent you want to charge, you'll have a clearer picture of how much a property can make you each month.

Why Carry Out a Rental Property Analysis?

Doing a rental valuation may seem like a lot of work, but in the long term, it's you that will benefit from it. It can keep you from making mistakes, and make sure you make smart investment decisions. If you want to be a successful real estate investor, then this should be part of your investment strategy.

Become a Successful Real Estate Investor Today

The careful thought and planning that conducting a rental property analysis involve is what separates a mediocre real estate investor from a great one. Always do careful research before making any investments. If you'd like help choosing the best investment properties in Idaho Falls or Boise, give us a call today.


Andrew L. Propst