How to Assess Rental Property Value
We’ve discussed the rich investment potential of the rental market overall in the US. And rental housing markets in cities such as Honolulu, Los Angeles, Phoenix, Oakland, Chicago, Bay Area, San Francisco and Las Vegas are worth a good look.
If you’re considering buying some rental properties, or you’re considering starting a property management company, it pays to assess the market. Investment professionals take a painstaking look at certain key performance indicators. You should too.
Before you investigate, you should look at your goals first. Which goals are most important to you as a future landlords or investment property owner?
A quick look at the financial factors to measure can help you whatever your revenue, equity, and profit goals. Smart investors know that the right KPIs are critical factors to understand before they push the buy button.
Benchmarks Are Unique to Each Group
Apartment building buyers and multifamily investors have different perspectives. They demand insight backed by data, actionable intelligence, and Key Performance Indicators (KPIs). They have teams to assess them and monitor performance. You can use a spreadsheet or KPI measurement software which are listed below.
SMB property managers should understand what the pros analyze. That way, they’ll understand what fees they can charge now and in future, or whether a property is even worth servicing. It all translates to knowing how to produce better ROI and avoid bad properties.
KPIs for Property Managers
In a previous popular post, we discussed kpis for property managers. These metrics cover non financial metrics because property managers don’t look at properties passively. They want to know how to improve it. Investors just walk away from a troubled property.
Rental Property Investment KPIs
Multifamily investors, apartment building buyers, residential landlords, and retail property investors often have specific financial KPIs they use.
Here are the Top 7 rental investment property indicators:
- cost of acquisition – fees, commissions, taxes, debt, legal costs, compliance, and the selling price
- gross potential income – total income if all units were rented
- net operating income – is the potential rental income after subtracting operating expenses
- net present value – the present value of future equity, income, and rate of return
- internal rate of return – this is the net present value expressed as a percentage rate a real estate investment grows or declines
- cap rate – the ratio of the property’s net operating income divided by its market value
- cash flow – gross annual rental income / property price) × 100%
Please do Share with others who May be Rental Property Buyers/Investors
General KPIs
However, some might only use general KPIs such as cash flow, location, rent per property, price to income ratio, vacancies, vacancy rate, lease renewal rate, taxes, and maintenance costs. They might also rate renter churn rate, renter lifetime value, and operating costs. These are results you’d like to see in your property owner reports.
These calculations can get much more detailed where each is weighted algorithmically. Some matter while others are just nice-to-haves.
There are other factors too including political, tax laws, building regulations, tenant satisfaction, etc that affect the final decision on buying or selling rental investment property.
Rental Investment Software
The property owners reports you can share with owners contain vital information on their investment KPIs and ROI. They’ll be a persuasive component for potential investors in those properties too. You can weigh your client landlords KPI performance against industry standards. This can help you determine whether your services are worthy and how you might improve or add value.
Top KPI Measurement Software Products
For rental property investors who are buying numerous apartments, buildings or multifamily units, a good software application might help. ManageCasa may offer the analytics and reporting features you need. If not, here’s a good list of the top KPI software products to consider:
www.managecasa.com
www.kpidashboards.com/
www.metricx.com/
www.reachreporting.com/
www.zoho.com/analytics/
www.scoro.com/
www.simplekpi.com/
www.datapine.com/
www.idashboards.com/
Further Reading on Property Investment:
Investing Models: investopedia.com/articles/mortgages-real-estate/11/how-to-value-real-estate-rental.asp
Forbes Case Studies: forbes.com/sites/forbesrealestatecouncil/2019/02/11/how-to-value-a-rental-property-before-you-buy/#855ca1e50044
Estimating Expenses: fortunebuilders.com/rental-property-investment/
After you’ve purchased your rental investment property, you’ll need to set the right rent price. See our posts on How to Rent out your House, how to build good relations with tenants, and how property management companies add value.
Check out ManageCasa’s KPI analysis features and owner/investor reporting tools.
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See also: Property Management Analytics Software | KPI Indicators | Trends in Property Management | Honolulu Rental Property Report | California Housing Predictions | Hawaii Property Management Companies | California Property Management Companies | Florida Property Management Companies | Chicago Property Management Companies | Rental Housing Market | Property Management Software | Housing Market Outlook
