How to Conduct a Comprehensive Rental Analysis for Property Investors

How to Conduct a Comprehensive Rental Analysis for Property Investors

The typical age for investing in real estate has reached a new high. If you're a new property investor and eager to start investing in a rental property, wait a second. Your lack of experience and expertise could lead to costly mistakes.

Instead, take the time to complete a rental analysis. A thorough understanding of Denver's rental market can help you make informed decisions.

Not sure where to start? Read on for the tips you need to complete a rental analysis today!

Research the Local Rental Market

Before investing in a rental property, explore Denver. Make a note of the:

  • Prevailing property prices
  • Real estate appreciation rates
  • Share of renters vs homeowners
  • Average rental rates
  • Rental demand
  • Price-to-rent ratio
  • Average rental operating costs
  • Return on investment
  • Legal environment

Consider the existing vacancy rate of each neighborhood you explore. The rental vacancy rate in the US is already over 6%. Without help and a strong property marketing strategy, you could struggle to find renters.

Explore Each Neighborhood

Each area in Denver has a unique rental market. Certain factors can help you attract tenants, help your investment property perform, and bring high profits.

When exploring each neighborhood, consider the:

  • Access to public transportation
  • Reasonable walkability score
  • Safety
  • New businesses
  • Access to quality education
  • Access to medical services
  • Nearby venues, attractions, facilities
  • Access to dining and shopping

Areas that tick every box will have higher property prices and increased demand. Better rental rates will compensate for the difference.

As you explore these neighborhoods, avoid areas with closed businesses, vacant properties, high crime rates, and poor maintenance. Scratch noisy and polluted areas or remote areas off your list. While properties in these areas are cheaper, expenses will be higher, affecting the rental property value.

Consider Operating Expenses

As you look for your first rental property, determine if each investment property is financially viable. Consider operating expenses, including:

  • Utilities
  • Property management fees
  • Regular maintenance
  • Insurance
  • Property taxes

Determine your annual rent income. Subtract these operating expenses from your annual income to determine your net rental income.

Make sure your net rental income exceeds your expenses. Otherwise, you'll lose money due to negative cash flow.

Seek Professional Advice

Consult a property management company to confirm your rental analysis. The best property managers will have access to tools and resources that can help.

They'll ensure you have a thorough understanding of:

Your property manager can help you compare investment properties to determine which one offers the best potential return on investment. They'll review each property's expected cash flow, conditions, and location.

Their report will include rent prices, cash flow projections, market trends, and expected expenses. They'll also factor in future growth. Use the data they collect to complete your rental analysis report and make a decision.

Complete Your Denver Rental Analysis

Completing a thorough rental analysis of your potential investment property can help you make an informed choice. Use these tips before you start investing in a rental property. Don't forget to consult local experts.

Look no further for guidance than PMI Elevation. Our team has nearly 20 years of industry experience helping new property investors like you.

We're the top property management company with the awards to prove it. Contact us to complete your rental analysis!