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How To Value A Rental Property Before You Buy

Side-by-side doubles will rent for less; duplexes (units above and below each other) will rent for even less, and three to four units in a single two-story building will often rent for less still. Only in fairly depressed markets would most investors be able to buy properties that perform this well. Estimate the potential rent price. Determine what your ROI should be — not what you want it to be. In Springfield that target may be 15% to 20%, but realistically in an appreciating market, 10% may be a spectacular return. In the case study above, I calculated my ROI based on the forecasted profit and on the amount of money invested in the property. What is invested in the property is a hard number; there is no estimating involved. It is possible to make a very accurate estimate of the value of a rental property before you buy it. This number is your projected profit. The resulting number will give you your target purchase price.