Property Analysis

Learn How to Analyze Property for Profitability

Calculate your property’s profitability

How Do You Analyze an Investment Property?

Want to see if a potential investment property is actually going to increase your overall wealth? When it comes to analyzing a property for profitability, you need to ask yourself these questions:

What is the
property's
profitability

Is it a high
return
investment

How does its
profitability
compares?

We can answer these questions by looking at 3 different values:

  • Capitalization rate (cap rate)
  • Return on investment (ROI) 
  • Gross rental multiplier(GRM)
Note: Although all of these values are useful for analyzing the profitability of an investment property, the cap rate is the most common means of determining if a property is a good investment

Cap rate measures the risk of an investment. The greater the cap rate, the lower the risk.
Cap rate is calculated by dividing the net operating income b the market value of the

A risk property has a cap rate between 7%-10%.  
ROI measures the amount of profit. The greater the Roi, the investment. ROI is calculated by subtracting the invested amount from the returned amount and dividing by the invested amount.
A profitable property has a ROI between 10%-7%.  
GRM measures the property income value. The lower the GRM, the lower the investment risk. GRM is calculated by dividing the property price by the grass rental income.
A high income value property has a GRM between 4%-7%.
Submit