Property assessment

How do you assess the potential rental income of a property before purchasing it for investment purposes?

The gross rental yield for an individual property can be found by dividing the annual rent collected by the total property cost, then multiplying that number by 100 to get the percentage. The total property cost includes the purchase price, all closing costs, and renovation costs.

There are several factors to consider when assessing the rental income potential of a property. First, it's important to research the rental rates in the area and the demand for rental properties. It's also important to consider the vacancy rate, which is the percentage of rental properties that are currently vacant. The vacancy rate can give an indication of how easy or difficult it may be to find tenants for the property. Additionally, it's important to factor in the cost of maintenance, repairs, and other expenses that may be incurred as a landlord. Finally, the property's potential income can be estimated by subtracting the expenses from the rental income.

For investment properties, future rental income is calculated by adjusting the monthly rent collected for vacancies, loss, maintenance, and management expenses.