Rental Property Cash flow Assignment | College Homework Help

I need more details about my formal report. more data on calculation and visual to show. I need an executive summary for the report also

Title Page: The Calculations of Rental Property Cash Flow

Introduction:

Understanding the factors of the calculation of the cash flow of rental property is important to a new real estate investor. Individuals who are looking to invest in a rental real estate business are concerned about whether the risks they are taking will pay off as all-new investors do. Rental properties cash flow could be either negative or positive. New real estate investors must do a lot of research on a property before they purchase it to avoid the mistake of getting themselves into negative cash flow. The factors the must be considered by investors are the following:

• Location
• Property type
• Vacancy rate
• Maintenance expense
• Taxes and utilities expense

It is important for new real estate investors must have an accurate evaluation of all these factors. It will show them whether the property has a positive or negative cash flow.

Location must be Considered by New Investors

Location is one of the important factors that should be considered by all new real estate investors. In the article Real Estate Rental Market Analysis, Carol Deeb states, before an investment of a rental property, one must a “include a rental the market analysis” to evaluate the factors of finding the market rate that landlords can charges tenant. This is one of the most important steps for a new investor. It helps the investor avoid making a mistake during a purchase to due uncertainty. In the article: How to invest in rental property, Lesiba Mooka says “a property in the right location for the right target market can be a worthwhile buy-to-let investment.” This means certain tenants have a higher demand for a certain location, and when you have the right property in the right place, you made the right investment. This is true because most families look for a location where they have a reasonable distance to commute to work. Tenants with children might look for a location near a park and public school. Investment property near a college campus will most likely attract students in college.  New investors must consider location before the purchase of investment property in determining market value and demand.

Important factors Property type

Property type is another important factor to consider before the purchase of an investment property. All new rental property investment must look at the right type of property. In the article: Multifamily Investment Strategies: Does Property Class and Market Type Matter? show the benefits of investing in multifamily. It is stated in the article that “multifamily assets historically provide strong income and appreciation returns”. This is true because multifamily properties are two units or more that will cover property expenses and in providing positive cash flow. In the article, The Investment No-Brainer: Single-Family Rentals or Multifamily? Comparing between single-family and multifamily homes, Jerry Chautin says that Jerry Chautin “Purchasing single rental units is not the better option.” It is true that multifamily generates more income because there are at least two tenants paying rent each month. With multifamily, even if one unit becomes vacant, the other will provide income until that other becomes occupied.                                      Vacancy Rate

Another factor that is very important to consider become a purchase of an investment property is the vacancy rate. In the article Calculating Loss to Lease and Effective Gross Income, it is stated that “Property can be physically vacant or suffer from economic vacancy.” A vacant property is one that is not occupied by any tenant. According to Liz Brumer-Smith, two ways to calculate vacancy rate is “as an average showing the amount of time the rental unit(s) remain unoccupied, or a current vacancy rate, which shows the current number of un-rented units. This is typically calculated on an annual basis and is shown as a percentage.” Three types of vacancy rate include:

• Physical vacancy rate
• Economical vacancy rate
• Market average

Before an investment of a rental property, a new investor should consider doing research on the vacancy rate of the property. This information can be found in a survey conducted by the U.S Census Bureau. A low vacancy rate is good because that means the property is in high demand for that property. New investors should consider researching the vacancy rate to ensure that they invest in low vacancy rate property. This helps an investor estimate whether the property has a positive or negative cash flow.

Maintenance expense

Maintenance Expense is another factor that should be consider by individual seeking to invest into rental property.

Work Cited

1.Deeb, Carol. “Real Estate Rental Market Analysis.” Small Business – Chron.com, http://smallbusiness.chron.com/real-estate-rental-market-analysis-40177.html. Accessed 23 April 2020.

2.Ndweni, Buhle. “How to Invest in Rental Property.” Finweek, Feb. 2016, pp. 40–41. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=113229183&site=ehost-live.

3.Harris, Joshua A. “Multifamily Investment Strategies: Does Property Class and Market Type Matter?” Real Estate Finance (Aspen Publishers Inc.), vol. 34, no. 1, Summer 2017, pp. 3–14. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=123453473&site=ehost-live.

4.“The Investment No-Brainer: Single-Family Rentals or Multifamily?” Units, vol. 38, no. 12, Dec. 2014, p. 28. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=bth&AN=100713044&site=ehost-live.

5.Brumer-Smith, Liz. “How to Calculate the Vacancy Rate for a Rental Property?” Millionacres,                                                                      https://www.fool.com/millionacres/real-estate-basics/articles/how-calculate-vacancy-rate-rental-property/