Turnkey real estate investment firms take great care when preparing a complete cash flow analysis. After a potential property is identified, the next step is to determine how much will be needed to repair or remodel the structure and how much will ultimately be financed.

The amount financed along withrent market survey prevalent interest rates, insurance and property taxes will be calculated along with an estimated amount for annual repairs and maintenance. That’s the first part of cash flow. The second is how much rent to charge.

That can be a moving target when deciding what to charge tenants regardless if the project is a multi-family apartment building or a single family home. You want to charge as much rent as you can but you also want to be competitive with surrounding rentals to keep occupancy rates near 100 percent as possible. An individual investor who evaluates a potential investment can research the local multiple listing service to see what similar properties in the area are asking for rent and there are other services that can provide you with similar data but if you want to use what banks use when calculating rent you’ll order a Rental Market Analysis.

A rental market analysis is performed by a licensed real estate appraiser, typically as a supporting document in a standard property appraisal. The appraiser will perform a rent survey throughout the area documenting real time rental rates then comparing those properties with the subject property. This analysis will include occupancy rates, price per square foot, age and condition of the surrounding properties as well as an overview of the current market and future real estate market conditions.

Depending upon the scope of the potential project, an appraisal with a rental market analysis will cost $500 and up. That may sound a bit expensive just for a report but it’s a pittance compared to making a bad decision. Instead of a rental analysis, think of it as an insurance policy, protecting you against bad data.