The payment of rent for use of an item is part of our everyday vernacular. We rent cars, homes, boats, even televisions. An airline ticket can be seen as renting a seat on an airplane to a destination on a particular date and time. Most often, however, a conversation about rent refers to real estate property.
Rental property can be inhabited by people, businesses or things. Homes and apartments are rented to people for residential use; malls rent “store fronts” to businesses to sell their wares in exchange for a percentage of revenue; businesses rent warehouses to hold and then distribute their goods. Google® rents buildings for servers. Farmers rent space inside a grain silo to store their crops. Taco Bell® rents land to build their stores on. These are all examples of rental property.
Rental property is, in its simplistic form, real estate property owned by one person and made available to another person with an exchange of value.
The application of my book, How To Read A Rent Roll is best suited to the analysis of rental property. We answer the question about rental property prior to the discussion of rental income because without ownership of rental property you have no rights to the income derived from the property.
Ownership of rental property is a business. A business opens its doors for purposes of conducting business and making a profit. The property owner sets out a sign selling his or her wares—a certain space for a certain price.
Owners of rental property accept money for the use of a particular space for a set length of time. Most residential property is rented in one-year increments with payment of rent due once each month. Commercial, retail and office space is rented in one, three, five and twenty year increments. Hotels rent rooms for one night at a time. These are all forms of rental property.
This article is an excerpt from the book How To Read A Rent Roll: A guide to understanding rental income by John Wilhoit, Jr.
This article is intended to be informational only and does not provide legal, financial or accounting advice. See http://multifamilyinsight.com. Multifamily Insight.