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Multiply the property's asking price or market value by 1% (e.g., $150,000 market value corresponds to a minimum monthly rent of $1,500). If you can’t find any current rental data, employ the 1% Rule to estimate monthly rent. If the numbers don’t work then the property is too expensive. Cap Rate derives the potential rate of return from Net Operating Income (NOI), while GRM relates the property's fair market value to its gross rental income. Utilize financial metrics such as the Capitalization Rate (Cap Rate) and Gross Rent Multiplier (GRM) to evaluate potential returns. Once market value is ascertained, you need to determine how much rent you would need to charge to achieve your financial targets. Real estate agents and online platforms like Zillow and can assist in this regard. By utilizing recent sales data, active listings and unsold properties you can create a comparison value of similar properties in the area.
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This is similar to the process appraisers do. To determine the fair market value of a rental property you can employ various estimation techniques.Ĭreate a Comparative Market Analysis (CMA).
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The first bit of data you’ll need when building your rental property analysis spreadsheet is the fair market value of the property. To create your own property analysis spreadsheet follow these four key steps: 1. For example, Google Sheets, Microsoft Excel, LibreOffice Calc, or Open Office Calc. The first step is to choose the platform you want to build the rental property analysis spreadsheet on. Download the free template How to Create a Rental Property Analysis SpreadsheetĮmploying a spreadsheet simplifies updates when assessing multiple investment options, aiding in your decision-making process.