Property Management Blog

Understanding Rental Analysis: Key Metrics and Best Practices

Understanding Rental Analysis: Key Metrics and Best Practices

Much like numerous other large American cities, Portland rental prices have been skyrocketing for years now.

If you're looking to make a real estate investment, higher rent prices present a lucrative opportunity. Portland is a complex real estate market, however, so it's important to perform a thorough rental analysis before purchasing a residential investment property.

Today, we'll help you understand the rental valuation process with the key metrics and best practices to know. The importance of setting appropriate rent prices can't be understated, so keep reading and let us help you maximize your rental investment.

Why You Need a Rental Analysis

A rental analysis helps you gain a financial understanding of an investment property. To set appropriate rental prices, you need to look at local rental market data.

If you set your prices too high, you could end up with vacancies, which are every landlord's worst enemy. Set your prices too low and you'll invite undesirable tenants and risk devaluing your rental property.

A thorough analysis will look at other rental homes in similar areas to give you a strong sense of what your rental is worth. Armed with this knowledge, you can create stronger financial projections for your real estate investments.

What's Included In a Rental Valuation?

There are countless things you can account for in a rental valuation. You'll look at outside factors, like the neighborhood and nearby properties. You'll also look at internal factors, like your mortgage payments and potential cash flow.

Neighborhood and Property Comparisons

When tenants search for rentals, they're looking for a home, but they're also looking for a neighborhood. Certain tenants will pay more for a smaller unit to be closer to the amenities they value most. If your property has great schools, parks, and/or restaurants nearby, you can charge more for rent.

You'll also need to look at the competition. Research similar properties in your area to figure out what they're charging their tenants. Specifically, compare yours with properties that are of similar square footage with the same number of bedrooms.

The Property Itself

You also need to account for the real estate market. How much you pay for your property matters because you need to cover your mortgage payments with enough cash left over to pay for maintenance when needed.

Some landlords opt for the 1-2% rule. This makes things simple by stating that your rental prices should be 1-2% of what you paid for the home.

With the average cost of a home being around $530,000 in Portland, that would mean charging $5,300 per month in rent. Although some single-family homes do cost around that much to rent, the best way to get these high rent prices is to convert your home into multiple units.

How Property Management Can Help

Now that you understand the importance of rental analysis, you can properly price your Portland rental property. Even with this information, it can be difficult to get a handle on the rental market in Portland. Having an experienced professional's help makes things much easier.

At PropM Inc., our goal is to help Portland property owners and renters do what's best for them. To get a free rental property consultation, contact us today.