Rental Houses - Conducting Appropriate Financial Analysis

When trying to analyze rental houses, there are a number of financial factors that you should consider. Here are the basics of how to conduct appropriate financial analysis on rental houses.

Market Rent

You need to start out by comparing your house to the market rent in the area. In order to determine the market rent, you are going to need to look at some other rental properties. You can look online or call around to some different rental properties to determine how much they charge in rent. You can also get the square footage of the property and then divide the price by the square footage. This will tell you how much rent is being charged per square foot.

Cash Flow

You also need to conduct a cash flow analysis on the rental property. During this process, you need to determine all of the potential costs that you will have to pay for this property. For example, you need to account for average maintenance costs, insurance costs, marketing costs, and any other costs that you can think of. Take the amount that you plan on charging for rent and subtract the costs from that amount. This will give you an idea of how much cash flow you can expect from the property.

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