A rental property should be evaluated from records, not from the phrase “income generating.”
The building may be full today and still be a poor purchase if rents are overstated, expenses are high or major repairs are due.
Verify the unit count
Walk the property and count the actual rentable units.
Compare that with the rent schedule and any approvals or plans relevant to the building.
Ask for rent records
Request evidence of what tenants actually pay.
Useful records can include:
- tenancy agreements
- rent schedule
- receipts or statements
- arrears record
- deposit record
Do not calculate returns from the maximum theoretical rent unless the property is consistently achieving it.
Check occupancy
Find out how many units are occupied today and how often vacancies occur.
A building with unusually high turnover may have a pricing, location, water or maintenance problem.
Build an expense list
Rental income is not the same as profit.
Common costs include:
- repairs
- management
- water
- common electricity
- security
- cleaning
- rates
- insurance
- vacancy
- taxes
For residential rental taxation, see our dedicated residential rental income tax guide.
Inspect the physical asset
Look at the roof, drainage, plumbing, electrical systems, water storage, sewer or biodigester system and common areas.
Deferred maintenance can turn into a large bill shortly after purchase.
Verify the property itself
Run the title and seller checks just as you would with vacant land.
Also confirm that what has been built corresponds with the property being sold.
Calculate yield consistently
Use actual or defensible annual rent and compare it with the total acquisition cost.
Our rental yield guide explains the calculation.
If you are comparing property income with more liquid alternatives, Baini’s guide to money market funds explains how they work, including returns, fees and liquidity.
Akama’s Kitengela rental compound is an example of the type of property where the building, unit mix and physical setup matter alongside the asking price.
