Why Real Estate Investment Analysis is Important for Investors

March 26, 2018

Why Real Estate Investment Analysis is Important

Real estate investment analysis helps you to evaluate the return potential of any property. Keep on reading to understand the benefits of analysis.

Looking at historical trends, you'll find that real estate investments have more reliable returns than the stock market.


Despite the 2008 housing crisis, real estate in major cities has climbed steadily year after year. Prices in some cities have doubled in the last 15 years with no clear end in sight. These kinds of returns are getting rarer, but can still be found in emerging markets.


Real estate investment analysis is the tool to use to understand how high your returns could be. As every neighborhood and market is different than the next, it's important to carefully read an analysis before you invest.


If you're wondering whether real estate investment analysis is relevant to your next investment, the short answer is "yes."


Here are three reasons why:


1. Keep an Eye on Depreciation


The truth is that for every market that appreciates, another one could depreciate.


If you follow historical trends, depreciation in some urban markets has allowed lower income investors to snatch up properties. In rust belt and southern cities, these investments are starting to appreciate as the top five cities become too expensive for young homeowners.


Watching depreciation trends can also allow you to shake loose any costly investments before they drop.

Investment analysis will help you measure any depreciation against your overall tax costs. It will give you the opportunity to deduct at the end of the year.


Since depreciation isn't a cash loss, you may not notice it for a year or more. An analysis will make sure you stay on top of your investment, no matter how the market turns.


2. Maintain Some Cash Flow


The most appealing reason for investing in rental properties is that you'll see positive cash flow for years to come.


If you do an investment analysis in advance of purchasing, you'll be able to see how much you could make. You can measure potential increases in rent against potential tax increases to determine the real return on your investment.


A robust real estate investment analysis will take into account the health of the local economy. If you're invested in an area with a few giant corporate employers, a dip in their profits could mean a dip in real estate.


If jobs are leaving, your property could drop in worth. An investment analysis will let you know the whole story of a region before you invest.


3. Watch Property Taxes


If you pay huge costs in property taxes, you can deduct them from your overall income at the end of the year. With an investment analysis, you'll get a realistic assessment of the value of a property value before you invest.

The best property investment could turn south when taxes are calculated.


Property taxes could be calculated on an inaccurate or out of date value. By watching property taxes, you can make sure you're not overpaying.


Real Estate Investment Analysis Can Reduce Costs

The point of an investment analysis is to keep you from overpaying on any of the costs to acquire or maintain a property.


Use an investment analysis as a shield against the rising costs of properties while letting it help predict the growth of your investment.


If you're ready for an analysis of your investments, contact us to get started!

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