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Your Rental Analysis Guide: Important Financial Metrics to Track

Your Rental Analysis Guide: Important Financial Metrics to Track

Around 10 million Americans record rental income on their tax returns, which shows how many manage properties.

Regularly analyzing your assets is essential for protecting your investment and seeing which areas you could improve on. But if you're a novice in this area, you likely won't know which metrics to use.

Sounds like you? No worries, we've got the answers you're searching for. Read our rental analysis guide for San Diego properties to learn more.

Market Rent Analysis

To determine the rental price, run a market rent analysis. This will take the property's size, location, and amenities into condition to decide the price. It also helps landlords choose competitive rental prices in the San Diego area and attract quality tenants.

Net Operating Income (NOI)

Landlords must understand their gross operating income (GOI) to see how much rental income they'll receive after losses, such as vacancy and credit issues. But to get a better idea, it's important to focus on the net operating income (NOI).

NOI takes the data from GOI while also accounting for operating costs. Net operating income also includes rent, parking, and other monthly fees.

Internal Rate of Return

If you manage a property portfolio, work out the internal rate of return (IRR). This is a crucial metric, as it assesses the future value of the investment compared to the current market climate in San Diego. Because of this, the data will help you make the necessary decisions.

Cash Flow per Unit

Property managers advise their clients to calculate the net cash flow, which indicates how your investment is operating. Every month you'll get this figure once all the expenses have been paid off. Although it's a simple calculation, you can decide whether you're happy with the profit or if there are areas you should work on.

Occupancy Rate

Another essential metric is measuring the property's occupancy rate. Ideally, aim for a vacancy rate of 5% to 10% so if your property is empty for a limited time, you will have enough cash to cover it. If you're unsure where to start, ask your property manager to figure out past occupancy rates to spot any issues.

Tenant Retention

The tenant retention rate is the percentage of occupants who renew their leases.

This will tell you how desirable it is to rent. Landlords should also focus on the tenant turnover rate, which is how often tenants leave. For instance, a high turnover rate means occupants aren't happy with the property, so use this to improve your investment.

As your property manager tracks these metrics, they will keep tenants happy and reduce the turnover rate, which means you'll earn a healthy profit.

Our Rental Analysis Guide

Now that you've read our rental analysis guide, it's easier to manage your San Diego property.

At Investment Safe Property Management, we have 25 years of experience with the San Diego market, so we understand how to keep both tenants and landlords happy. If you need help with your investment property, we'd love to help. Contact us today to chat with a member of our team.