Determining the Profitability of a Property

Determining if your target market has a good potential for enabling you to succeed in your investment is not easy. Though, it is also not that difficult. If you know the right thing to do, there are so many chances for you waiting in this industry. All you have to do is discover these opportunities and get yourself good at it by preparing such as reading articles like this one. We here at Jaxon Texas love to guide you through the process if you are willing to work with us. We are a 15-year-old property management company in Texas serving our clients through our high standard approach which not only enables the landlord to handle the tenants efficiently but also keeps them on the marketplace. So if you are planning to invest in a rental property, you can contact us anytime. 

The first thing we can suggest is for you to look at the average rents in your prospected area and then compare them to the average sale prices through a sales comparison model and an income model. This will help you determine your ROI (return of investment). One of the secrets to a successful ROI when it comes to real estate is to look hard at the numbers before purchasing. This is because real estate companies have different marketing strategies and you might not see the hidden charges that sometimes are being placed by these companies. And lastly, one should not be tricked by their advertising and marketing techniques because most of those are overrating or just plain hype. If you got persuaded by this kind of method, you might end up financially devastated.      

One simple method to calculate your potential income is by using the gross rent multiplier (GRM). Even though this tool is being used by many landlords and property investors, because this is applicable to both commercial and residential property, this is not a better replacement for other calculation methods of the profitability for a rental business because it doesn’t include other factors such as the expenses, vacancy, etc. Though, it is a helpful and efficient starting point to assess the potential income of the property you are going to buy. And, aside from the rental income, this formula can also be used for other investments such as materials or services in the property. Anyway, if you want us to make you understand more about this and/or other methods, don’t hesitate to call our staff now to answer your queries and provide you with useful information for your business plan. 

Now that we’ve already talked about how to determine the ROI using the basic method, another ideal way to have a strategic and advantaged approach is to consider the job market. This means that you should select a location with rising employment chances for people as it attracts more tenants. Usually, people transfer to more developed areas of a place or a city to look for job opportunities. To do this, you have to have an in-depth inquiry about the place. Some of the things you should do is read about what companies are occupying the surrounding location of the property you want to buy, search for an area with more employment offers, etc. However, be sure that the place you’ll get has a low crime rate. There is no debate, crime rates affect the mindset of the people because we all don’t want to be victimized or be in trouble. So if potential renters avoid your area, it will somehow possibly hurt your business.