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Rents and the Rental Market Place
You, as an investor or the agent of an investor, should be able to determine the dynamics of the rental market and in fact, should not purchase until you are thoroughly acquainted with it.
Contract Rent - what is being paid under the existing rental agreements and for how long.
Economic Rent - what could be charged on the open market if the property were readily available.
Consider Rent as to:
Quantity - how much is collected
Quality - financial stability of the tenant. For commercial property, you can ask to see the financial statements of commercial tenants if the lease so provides. For residential income property, review the rental applications of tenants.
Durability - if the property is residential, you may be concerned if the term of the lease is for a prolonged period. If the property is commercial, industrial or office type, you want the lease term to be at least three to five years.
How do you determine market rents? You call. Do continuous rent surveys. Be up to date in your market area.
