Every investment is a risk; there's never a guarantee of profit. However, some investments are riskier than others -- and for better or worse, real estate investment is one of the more difficult ones to predict. However, its volatility does come with the potential for incredibly high profits. A survey by Better Homes and Gardens Real Estate revealed that 96% of people who have invested in real estate believe their decision helped them achieve financial success. While predicting the market is incredibly difficult, there are a few things you can do to better manage and predict profits from your investment property.
Not all neighborhoods have the same real estate market, even if the neighborhoods are right next to each other. If you're looking to invest in property in your current neighborhood, you might be at a slight advantage for predicting the real estate market. However, if you're investing in property elsewhere, make sure you take the time to calculate rent prices, use neighborhood search tools, analyze property reports, and so on. The more research you do, the better you'll be able to predict your profits.
Knowing your neighborhood is important, but knowing as much as you can about your investment property may be even more so. How many square feet are in a single rental unit? How reliable are utilities, and how much will they cost renters? Know as much as possible about your property makes it easier to calculate rent prices that are going to maximize your earning potential.
Finally, once you have as much information as possible about your property, you can start estimating your potential earnings. Calculate rent prices that are fair for your space given the current market, and then figure out how much your rental property would be able to bring in during a given month. Don't forget to subtract expenses, like maintenance and taxes. You'll also want to account for times when your property will be left empt, as it might take you time to find new renters at the end of someone's lease.
Knowing just how much you can earn through your rental property can be complicated, but these steps can help you get started. For more information on real estate investment or to see what your rental may be worth with a rental rate calculator, contact Rentometer today.