Analyzing a rental property is so important and any new investor looking to purchase one needs to be well prepared and know exactly what they are looking for. Rookie investors will just buy or trust what their real estate agent would say. A professional investor will analyze these 5 things so they know 100% if the property they are going to buy will make money or not.
#1 thing a professional investor will look and analyze is the area the property is located. The investor will do homework beforehand and rate the area from A B C D/F. Each area has its Pros and Cons. The amateur investor will skip this step and just buy based on what they read online. They have done very little homework or the homework they have done was done incorrectly.
#2 thing the professional investor looks at is the ARV (After repair value). The pro knows the house current value based on the way it stands and will also know what the value will be after they rehab it. The amatuer does not know how to calculate the value. All the money is made and lost right here in calculating the value.
#3 thing the professional investor looks at is the rental numbers. They will do a complete rental analysis and come up with a market range for rent. The market rent will be determined by finding neighboring comps from 5 different sources.
#4 thing a professional will look at is the rehab cost. Pros know exactly how much things will cost to repair and how long it will take. This is when the magic happens and they create value in their properties. Lots of money made and lost here.
#5 thing the professional looks at is the total expenses. Pros know the exact expenses associated with a rental property. They do not base on assumptions but base everything on concrete facts. These facts will help determine the profit or loss of the property.
These are the top 5 most important items a new investor must look at in determining if they should buy a rental or not. Mastering these 5 things will allow an investor to make tens of thousands of dollars. Not know how to do these correctly will cause a new investor tens of thousands of dollars.
