Before you invest, it’s important to determine a reasonable estimate of the property’s income potential. For property that is already being leased, it’s easy enough to request documents that will show how much the property earns, how much it costs to maintain, and whether or not it has a history of being occupied consistently.
For new homes, you may have to dig a little deeper to determine supply and demand of rental housing in the area, as well as the going lease rate for homes of similar size, location and amenities. A licensed real estate agent who specializes in investment properties would be a good advisor. Be sure to check with your tax advisor, financial planner and other experts for guidance as well.
If it’s the weekend and you can’t contact those professionals right now, why not spend some time perusing the
Equifax Personal Finance blog? It’s got tons of articles written by national experts, and you can post comments or questions.
A recent post by real estate expert Ilyce Glink, “
The Best Way to Value Investment Property,” provides a simple formula for determining a property’s capitalization rate, or cap rate. This number compares the annual net revenue of a property to the initial investment in the property. The higher the rate, the better.
More formulas, information and practical explanations regarding investments of all kinds are waiting on the
Equifax Personal Finance blog. Check it out!