Good Rate of Return on Rental Property – Real estate investments, in general, are attracting many investors lately, but people with the least experience in that market prefer investing in rental properties inside the real estate investment. Newcomers to the field of real estate investments know very well that they might get a good rate of return on rental property investment specifically, with the least effort.
This new trend inside the field of real estate investment comes on an experiment to diversify the sources of income, and to secure a sustainable cash flow.
Rental property simply means that an investor who owns a property is renting it with all its units to occupants, and these occupants are paying rentals for the owner either monthly or annually.
The rate of return on rental properties is calculated as a percentage of the value of the property, for example:
If a property’s purchase price is 200,000 USD, and the rent paid by an occupant is 12,000 per annum, this means that the rate of return on rental property is 6 percent.
Many people might wonder what would be a good rate of return on rental property, and for the above, is 6 percent considered a good rate or not?
A good rate of return on rental property is something variable and no one can determine what could be a good rate of return except the owner of the property, but there are some factors affecting whether the owner of a property should see the rate of return on his rental property as good or not.
Factors affecting a good rate of return on rental property:
- The occupants
A property owner must make sure that the occupant renting the property is stable and be deciding to stay for a long time and there is no risk for this occupant to leave at any time. If these characteristics are found in an occupant with a lower rate of return of rental property, this is better than an unstable occupant willing to pay more.
- The location of the property
The location of the property could help in determining if the rent paid is a good rate of return on rental property or not, as the investor can check out how the market for renting properties is; also, an owner can know what the rentals paid for renting properties at the same location of his or her property are.
The aforementioned factors are the main two any investor willing to invest in rental properties should take into consideration before deciding whether he takes a good return on rental property or not. But there is one last piece of advice at the end of this article: an investor should always ask a consultant in real estate market before taking any decision in regards to selling or renting his or her property.
For more information you may contact us using the contact form here or by calling us on:
M: +966 54 4695067
T: +966 12 6614340
F: +966 12 6615245