How To Conduct an Accurate Rental Market Analysis

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How To Conduct an Accurate Rental Market Analysis

Whether you’re thinking of purchasing a rental property or trying to determine how much rent to charge, a rental market analysis is necessary. A rental market analysis will determine the rental rate to charge tenants, giving you a bigger picture of how much a piece of property can earn you. Market analyses are something every landlord and real estate investor should be doing to maximize their ROI. Here’s how to conduct an accurate rental market analysis to help you get the most out of your investment.

Analyze the Neighborhood

If you’ve already bought a rental property, you likely analyzed the neighborhood. If you haven’t, there are a few qualities to look for that determine the area’s overall value. Access to amenities, attractions, medical facilities, public transportation, schools, and overall safety will significantly impact a neighborhood’s value. The better the community and its overall location, the higher the value of your property. However, if your property is near noisy areas, is remote, vacant, dirty, or unsafe, each one of those factors may negatively impact the neighborhood’s value and your property’s overall value.

Evaluate Comparable Properties

Look at comparable properties when you’ve determined that the area is a good place to invest. This will give you a better idea of the average rent and how much you should charge for your property. First, ensure they’re in the same district and are the same type of rental—either short or long-term. A comparable property should have similar amenities, bedrooms, bathrooms, condition, and square footage. You can then check what they charge for rent and average it out, although doing so by hand is difficult, and you may want to set up an online spreadsheet to do the math for you.

Find the Average Price and Determine Rental Charge

Once you’ve found enough comparable rentals, you’ll want to average out how much rent they charge. While doing so, it’s also a good idea to account for amenities they have that you don’t and vice versa. Ideally, the rent you should charge should be between 0.8 to 1.1 percent of the property’s overall value. However, it should still look similar enough to the comparable properties, so they don’t beat you in pricing. This is a delicate balancing act, and you may need to adjust for turnover rates and market fluctuations.

Now that you know how to conduct an accurate rental market analysis, you’re better prepared to make the most out of your investment. Keeping your property’s overall value in mind and comparing it to other properties are the best ways to ensure you’re getting your money’s worth.