Rental Real Estate Series: Part 3 – Analyzing Rental Real Estate Returns

When analyzing rental real estate returns you should at least consider the tax implications and the cash flow.  Over time, I have changed my analysis approach here and there but I do like to keep it pretty simple still.  You can get bogged down in the analysis if you get too in-depth on it.  The best deals will sell quickly in about any market so it helps to see a quick summary to at least offer on a property.  Usually this analysis tells me enough to buy something based simply on the below.  I have set this up in a template so I can just update the Assumptions and everything self-calculates.  No matter how detailed you get, the real life numbers will be different anyway.  Keep in mind this is assuming zero vacancy and no turnover costs, that is why I have it calculate the monthly carrying cost if vacant because that will help you determine how much cash to keep in reserves (see the prior post on vacancy and turnover costs if you haven’t yet).

So here it is, my summary Rental Analysis (best viewed on a desktop/laptop/tablet).  I updated the Assumptions on the right side and it self-populates the left column.  Feel free to reach out if you want a copy of the file itself to get all the formulas!