There are milestones we set for ourselves to achieve, and one of those milestones everyone in the world shares is investing. Investments are a way to make passive income, to make sure that our money is growing and not just saved up and stagnant. Ask anyone and they will tell you that one of the most profitable investments is in property. Just think about renting out a place, for instance. You’ve bought a condo unit in which you’re getting a monthly payment from your tenant, a good way to earn on top of working a day job.
Knowing how to calculate and get the numbers on your rental property translates to how much you can get from it. You would want to find out the potential rental income of the property you are investing in so you can analyse the cash flow and have an estimate on the ROI (return of investment. This will help you determine if you will be burdened by the money you put in or have a successful investment in the long run.
To help you with estimating costs on buying and owning a rental property, know more about how you can calculate the numbers of your rental income the right way.
Calculate the Expenses
Weigh in the upfront costs and find out the probable expenses versus the estimated rental income. Do note that renting properties also includes other expenses such as the HOA (Homeowners Association) fee, mortgage payment, maintenance of the property and tax. You can’t start getting the right numbers of your projected rental income without factoring these items that add up to the costs. You first need to get a quote on these hidden figures before you get realistic numbers.
You should also check up on other rental properties near your chosen property because it also varies from area to area. Take into consideration how much they rent and calculate yours to check if you range within the fair market rent. Identifying this would help you determine if you should set up a lower rent to attract tenants or if the need to increase the rent is justifiable. Once you have an understanding of the fair market rent, you’ll be able to gauge the market’s preference and acquire tenants to maintain a positive cash flow.
Once you have the projected calculation of your income, you can deduct the expenses and get the estimates for your return of investment (ROI). You can use personal loan calculators by Newcastle Permanent Building Society for this.
What is considered a good ROI?
An estimate ROI over 10% is generally considered as a good deal and is labelled as a good investment; on average, an ROI from 4% to 10% is also considered as a reasonable percentage.
Determining the numbers can help you decide if becoming a landlord for the property of your choosing will be profitable for you. Once you have the predicted estimates, it helps you evaluate the property if you should also consider upgrading its features to positively attract tenants and give you a greater chance of continuous cash flow.