Understanding Property Rental Analysis and ROI

Property owners understand the need for clear indicators of their return on investment, and one very important tool to make sure that you’re getting the right returns is the property rental analysis process. Aspiring landlords who are embarking on a do-it-yourself property management approach should know the basics of cash flow and equity appreciation, among other things. However, they should also be able to conduct a smart analysis to generate high income and plenty of equity versus average returns!

What is Property Rental Analysis?

Property rental analysis is the process of analyzing an investment property with the objective of determining both its viability for being rented and its profitability as an income property.

There are several factors, metrics, and aspects to consider when doing a rental property analysis in residential property management. Some of these factors can affect the performance of income property directly. Others can be used to measure performance and calculate returns. 

Property rental analysis will also determine a competitive and fair rate for rent. More figures and calculations go into figuring out a rental rate that will attract renters, remain competitive, and bring profit all at the same time. Not knowing how to get this estimate might leave you undercharging (losing profit) or overestimating, giving you a bad reputation as a landlord. 

Metrics for ROI

Getting a good look at the whole picture will require you to break down the past year’s expenses, mortgage details, your maintenance and tax records, and cash flow statements. Several metrics you might want to consider are the following:

  • Cash Flow

Cash flow is simply calculated by subtracting expenses from income. While this provides a general idea of where you stand with your ROI, don’t forget to factor in other numbers that may affect this figure, such as taxes, insurance, repairs, association dues, etc. 

  • Net Operating Income

Net operating income is a calculation that determines the profitability of income-generating investments, such as your rental property, and is calculated as follows:

Income Generated From Property – Operating Expenses = NOI

Measuring the ongoing operations costs of a property can help you calculate how much potential revenue will come out of any given deal. 

  • Capitalization Rate

Capitalization rate or cap rate is used in commercial real estate to show the rate of return you can expect to have on your property. It’s computed by dividing the net operating income by the property’s asset value. This percentage estimates your potential returns against your investment in the real estate market.

  • Cash on Cash Return

Cash-on-cash returns measure the annual return you, as the property investor, made on the property, related to the amount of mortgage that was paid in the same year. It’s calculated as your annual pre-tax cash flow divided by the total cash that was invested.

Analyzing your own property is the best way to learn the ins and outs of your investment and project its returns. Knowing where you stand is valuable in order to keep your ROI coming and allow you to adjust given the circumstances. 

However, it can also be quite a difficult process to learn as you examine variables like tax advantages and disadvantages, equity, and property appreciation. Not all property owners have the time to master all of this, so investing in the right real estate management companies can take the burden off your shoulders and ensure that the work is done quickly and accurately. 


When doing your property rental analysis, it might be easy to get caught up in the numbers, but there are always other factors and particulars that don’t fit neatly into a formula. Still, it doesn’t hurt to know exactly where you stand when it comes to your ROI projections. This gives you plenty of leverage to adjust as needed, and combined with a little flexibility from other unforeseen factors you might not have considered, it can help your profit skyrocket.

The best property management company can assist you in all parts of the investment process, from buying and selling properties to easing the burden of day-to-day operations. That is precisely what we offer at Quest Management Group, where we specialize in residential and commercial property management for areas near Jacksonville. Call us today for a free quote!