John C. Mather once said, "There is strength in numbers, but organizing those numbers is one of the great challenges." While this might not seem like it pertains to rental property owners, it absolutely does.
A rental analysis can help you determine your numbers, but you have to collect them to get accurate information. With a rental analysis, you can make data-driven decisions for your Sarasota, Florida, property.
Keep reading to learn more.
What Is a Rental Analysis?
A rental analysis is a summary of the financial performance of a rental property. An analysis will compare the ratio of income and expenses to the owner's holdings.
This analysis is important for providing investors with an idea of what is and isn't working. Using the information in a rental analysis, you can make data-driven decisions to maximize your return on investment (ROI).
A property management company may offer a free rental property analysis to help you attain higher returns.
Performing a Rental Analysis
To perform a rental analysis, you need to gather relevant information. These are vital numbers to collect:
- Number of units
- Property square footage
- Total purchase expenses
- Income and expenses
- Mortgage payments and loans
If you have a property management team working for you, they should have this information readily available.
Rental Analysis Elements
Real estate analytics make up the majority of a rental analysis. This calculation of numbers can help you determine rent prices and make comparisons to the local Sarasota, Florida, rental market.
Net Operating Income
Net operating income (NOI) refers to the total income of a property once the expenses are disclosed. You can calculate this number using monthly income and expense records and then multiply that number by 12 (months in a year).
Property Income
To accurately determine the NOI, you need to figure out your property's total gross income. Income includes parking fees, utilities, and more, but mostly comes from tenant monthly payments.
Account for vacancies when determining this number.
Property Expenses
Add up the expenses from your property. Expenses are mostly consistent for rental property owners but can vary based on surges. Property expenses likely include:
- Repairs
- Insurance
- Taxes
- Utilities
- Mortgage interest
If you hire a property management company, add up these expenses as well.
Cash Flow, Rate of Return, and Capitalization Rate
Cash flow is one of the most important numbers to calculate as it includes the money left over after paying your bills.
The rate of return and capitalization rate are additional factors to consider when you analyze your rental property.
How Property Management Can Help
Rental analysis can help you make data-driven decisions as a Sarasota landlord because it involves financial calculations. With a holistic view of your property's finances, you can make essential changes based on your findings.
At PMI Sarasota, our full-service property management team can help you compare your property to others in the local market. We provide clients with high-quality services that can help them exceed their investment goals.
With over 20 years of industry experience, we know how to take a thorough look at the data to make changes that matter. Get a free rental analysis today to get started.
