If you want your rental property to be a profitable one, you need to conduct residential rental market analysis as soon as possible. Without it, you may never be able to reach the high potential of your property.
RMA or Rental Marketing is how you analyze the market to know the market profitability as well as compare it to the current profitability of your property. This process involves a lot of steps like making a neighborhood analysis, estimating rental costs as well as making market predictions as per your vast experience.
The process is long and tedious, to save you from this hectic process, we have compacted the entire process in 5 simple steps. Follow these, and you will ace the RMA in no time.
Gauge the Neighborhood:
The one thing that matters in the real estate industry, more than anything else, is location. You can never ignore the importance of location when it comes to buying or appraising a property. No one, in their right mind, would tell you that location doesn’t matter when it comes to the real estate market. Once you have locked on the state and city to invest in, you should start checking out the neighborhoods of that state. Investigate all neighborhoods and find the most profitable one; this should be your goal while conducting your analyses. Your focus should be on popular neighborhoods rather than the entire city.
By doing this, you will be able to predict your profit more accurately. For a neighborhood to be profitable, it needs to be close to schools, hospitals, and major landmarks of the city. It also needs to be on the safe side of the city, where the crime rate is low. It should also have amenities such as supermarkets, parks, malls, and shops as well as restaurants and entertainment facilities.
These are the factors that tenants and renters look for while checking out any location when hunting for rental properties.
Real Estate Comparable:
You cannot successfully pull off an RMA if you don’t know about real estate comparable. It’s the properties in the same neighborhood or the same area. Real estate Comparable is properties that are same in condition, size, and number of rooms as well as bathrooms.
Analyses of these comps allow the investors to price the average rent of an area. Moreover, investors can also check out different kinds of rental properties to decide which one is the most ideal and most profitable for them. To make your analysis worthwhile, always check out three comps.
When you choose to conduct a residential rental market analysis, you can find your comps by using several popular ways. If you have conventional thinking, you can always check with the local real estate agents or review the public records. This is a good method that has been in play for many years, but it can get frustratingly slow.
For new-age investors, you can easily check the tools online. For example, Mashvisor’s investment property calculator lets you access to comp reports for your preferred areas.
Rent per Square Foot:
Rent per sq/ft. varies from state to state in the US. Rent per sq/ft. is calculated, so it gives the investors an idea of livable space. This value can be calculated per month or at the end of each year. Computing the rent per square foot is vital; however, you always need to bear in mind all the factors that can affect its value.
Adjusting the Rental Price:
Charging over or under has many drawbacks, so you always need to charge just the right amount while adjusting the rental price. Here are some factors that you need to take into account while calculating as well as improving the rent price of your property.
This step is also important to ensure accuracy when learning how to do a rental market analysis. When adjusting the rental price, you need to look into two things:
Amenities or facilities that your property offers substantially affects the rent price, and those who aren’t aware of it are bearing a considerable loss on their property. Gyms, pet-friendly pools, and parks, high security as well as private entry are some amenities that can hike up the rent. So, always adjust your rental rate per square foot with all these facilities in mind.
Calculating the occupancy rate is easy, out of the 12 months; your property is occupied for how many months? Let’s say it’s nine months, that’s 75%. By understanding the vacancy and occupancy rate of a popular neighborhood, you will be able to make a profitable investment. Say, an area is a high security as well as close to major landmarks, it all looks good from the outside, but the occupancy rate isn’t high. Your investment will not reap any benefits in such an area.
Costs of Rental Properties:
Rental properties aren’t only ROI; they are also expenses. There are many hidden expenses in a rental property that many investors are unaware of. Evident costs are mortgage, insurance, and taxes. The expenses that many may forget to take into account are utilities, maintenance, and emergencies. These costs are also affected by the location. You’d want to keep these costs to a minimum so that you can seriously enjoy the ROI on your property. The easiest way to do that is to compare the costs of rental property with rental price per square foot.
For a real estate investor conducting a residential rental market analysis is very important to succeed and make it big in the real estate market. This process demands both time and effort, it can also be extremely tedious and frustrating. To make things easier, you can always seek help from online resources such as Mashvisor. This tool offers all the necessary and essential data that one needs to carry out an RMA.
With the help of these online tools, you can do an accurate analysis and get a better ROI on your rental property. Online aid and resources, like Mashvisor enables you to gain more experience, skills, and well as help you to invest better and bigger.