Property Investment - Rental Potential Analysis

Learn how to analyze the rental potential when buying investment property

By Joel Teo 2006 All Rights Reserved

There are two traditional ways to make money from property investment.  The first being capital appreciation and the second being rental returns.  Good rental returns incidentally affect capital appreciation to some extent it would be hard to segregate the two.  Thus, this article will identify three indicators of a good rental property investment so as to help one that can form the basis of your next real estate property investment.

Firstly, good human traffic would be key if the investment property category that you are interested in involves shopping malls, strips and shop houses.  Spend some time thinking about what type of crowd a rental property seeks to attract and then go down during the period in which you think the human traffic is at its maximum to have a gauge of the ground conditions. 

For instance some rental property attracts the office crowd, then you want to analyze when the office crowd might appear like during lunch time and you can then go down during lunch time to estimate the crowd size and figure out whether your investment property investment will give you good rental yields.

Secondly, pay some attention to future developments in your area to figure out where the large shopping malls might develop and then purchase your property in the direction of progress as some real estate writers like to put it.  The reason for this is that where there is development, there would be an increase in crowds and this would be in addition to any crowds that you might have noticed in the first point above and therefore increase you rental from your investment property. 

One good way to stay abreast of such developments is to network with property developers, architects and real estate agents who come across such information.  Such a team can form part of your Master Mind Team as Napoleon Hill suggested to accelerate your property investment progress.  Another way is to spend some money in a real estate investing magazine in your country or area and be updated on property investment trends.

Thirdly accessibility to transport is very important for rentals.  When accessing an investment property for rental purposes, if your property is far out from the city but is readily accessible from the subway, bus routes or walking or the freeway, the rental of your property might be a lot higher than a property that is nearer the city but is very inaccessible.  When determining accessibility, check if its connected to the freeway or whether public transport is readily accessible.

In addition, if your investment property involves industrial property, you want areas where your tenants can move their manufactured goods easily to the port.  Spend some time talking to your real estate agent about this and they can advice you on this. 

In conclusion, do spend some time thinking about what your tenant might want in a rental property of that particular class and you will be able to choose a property that can help you achieve good rental yields that is critical for cash flow purposes.

Joel Teo runs a real estate investing website. Visit the property investment article directory today at The Property Investment Resource to learn more about property investment.