Unlocking the potential of rental properties requires a thorough understanding of various factors. This comprehensive guide to rental property analysis provides a detailed framework for investors to navigate the complexities of the market, from initial evaluation to long-term strategy. This in-depth exploration encompasses essential aspects, including financial projections, market trends, property condition assessments, and legal considerations, ensuring a robust understanding of the entire process.
By delving into each stage, from initial property selection to risk mitigation strategies, this analysis equips investors with the knowledge needed to make informed decisions and maximize returns. This guide serves as a roadmap for success in the competitive rental market, enabling investors to confidently navigate the intricacies of the industry.
Introduction to Rental Property Evaluation
Rental property analysis is a critical process for real estate investors, enabling informed decisions about acquiring, managing, and maximizing returns from rental properties. It involves a systematic evaluation of various factors to determine the potential profitability and risk associated with a specific property. A thorough understanding of these factors is essential for successful investment strategies.Rental property evaluation goes beyond simply inspecting the property; it encompasses a comprehensive assessment of market conditions, financial projections, and potential risks.
By meticulously examining these elements, investors can make well-informed decisions that align with their financial goals and risk tolerance.
Key Objectives of Rental Property Evaluation
The primary objectives of evaluating rental properties are to determine the property’s market value, assess its potential rental income, and estimate the associated costs and expenses. Accurate estimations of these factors are crucial for evaluating the overall profitability and potential returns of the investment.
Importance of Thorough Property Analysis for Investors
Thorough analysis is vital for investors to mitigate potential risks and maximize returns. It allows investors to understand the property’s strengths and weaknesses, identify potential problems, and make data-driven decisions. A well-analyzed property can provide a more accurate assessment of its true market value and long-term potential. This allows investors to make confident decisions, minimize financial losses, and maximize returns.
Stages Involved in a Comprehensive Rental Property Evaluation
A comprehensive evaluation typically involves several key stages:
- Market Research: Understanding local market trends, vacancy rates, and comparable rental rates is essential for setting competitive rental rates and estimating potential income.
- Property Inspection: A thorough inspection of the property’s condition, including structural integrity, amenities, and overall appeal, helps assess its suitability for tenants and estimate potential maintenance costs.
- Financial Analysis: Projecting potential rental income, expenses (mortgage payments, property taxes, insurance, maintenance), and net operating income (NOI) allows for a clear picture of the property’s financial viability. A common calculation is NOI = Gross Rental Income – Operating Expenses. For example, a property with $2,000 in monthly rental income and $800 in monthly expenses would have a monthly NOI of $1,200.
- Risk Assessment: Identifying potential risks, such as tenant turnover, property damage, or changes in market conditions, is critical for mitigating potential losses. Factors like the local tenant population and economic stability are key here.
- Comparative Analysis: Comparing the subject property with similar properties in the same area, considering factors such as size, features, and location, provides valuable insights into its market value and rental potential. This is vital to accurately assess the market value and potential income.
Types of Rental Properties
Rental properties can include various types, each with its unique characteristics and evaluation considerations:
- Single-family homes: These are individual houses designed for a single family and require careful consideration of factors like location, neighborhood amenities, and market demand.
- Apartments: Multi-unit residential buildings, these need an evaluation focusing on factors like unit size, building condition, and potential for attracting tenants.
- Commercial spaces: These include retail shops, office spaces, and industrial units. The analysis should consider factors like the target market, lease terms, and the strength of the local business environment.
Factors to Consider in Rental Property Assessment
Careful consideration of numerous factors is vital for a thorough analysis:
| Category | Factors |
|---|---|
| Market | Location, neighborhood, demand, competition, vacancy rates, rental rates, local economy |
| Property | Size, condition, features, amenities, age, structural integrity, potential for upgrades, parking, utilities, insurance |
| Financial | Purchase price, mortgage interest rates, property taxes, insurance premiums, maintenance costs, potential rental income, operating expenses, net operating income (NOI), capitalization rate (cap rate), return on investment (ROI) |
| Legal | Zoning regulations, building codes, permits, leases, tenant laws |
Financial Analysis of Rental Properties
A thorough financial analysis is crucial for evaluating the profitability and potential return of a rental property. This analysis considers both current and projected income and expenses, allowing investors to make informed decisions regarding investment strategies and property management. A strong financial model helps predict future cash flows and assess the overall viability of the investment.
Calculating Rental Income Potential
Rental income is the primary source of revenue for a rental property. Accurate estimation of potential income is paramount for a sound financial analysis. This involves considering factors such as market rent rates, lease terms, and potential vacancy periods. Analyzing comparable properties in the area, along with understanding local market trends, helps in establishing realistic rental rates.
Estimating Operating Expenses
Operating expenses represent the costs associated with maintaining and managing a rental property. These expenses are vital to determine the net income generated by the property. Categories of operating expenses include property taxes, insurance, maintenance, utilities, and property management fees. Accurate estimation of these costs is essential for a precise evaluation of the property’s financial performance.
Projecting Future Cash Flows
Forecasting future cash flows is essential for evaluating the long-term profitability of a rental property. This involves projecting rental income, operating expenses, and capital expenditures over a specified period. Projecting future cash flows helps anticipate potential challenges and opportunities associated with the property, such as market fluctuations or needed renovations. A realistic outlook is crucial to understand the investment’s long-term financial viability.
Financial Models for Property Valuation
Various financial models can be used to assess the value of a rental property. These models consider factors like projected cash flows, discount rates, and market comparables. The discounted cash flow (DCF) model, for example, calculates the present value of future cash flows to determine the property’s intrinsic value. Other models like the comparable sales approach utilize data from recently sold similar properties to estimate market value.
Key Financial Metrics for Evaluating Rental Properties
A summary of key financial metrics aids in evaluating the investment’s attractiveness. These metrics provide a concise overview of the property’s financial performance and potential return.
| Metric | Formula/Explanation |
|---|---|
| Cap Rate | Net Operating Income (NOI) / Property Value |
| Return on Investment (ROI) | Annual Net Operating Income (NOI) / Total Investment Cost |
| Gross Rent Multiplier (GRM) | Property Value / Gross Annual Rent |
Property Taxes and Insurance Costs
Property taxes and insurance costs are significant operating expenses that impact the profitability of a rental property. These costs vary depending on factors such as location, property value, and insurance coverage. Understanding and accounting for these expenses is essential for determining the true net operating income and overall return on investment. Factors like property value assessments and insurance premiums need to be considered in the analysis.
Assessing the Impact of Vacancy Rates
Vacancy rates directly affect the rental income potential of a property. Periods of vacancy reduce the overall income generated, impacting the profitability of the investment. A higher vacancy rate translates to a lower income stream. Realistic estimates of vacancy rates, considering market conditions and local trends, are crucial to the analysis. Vacancy rates can be estimated based on historical data and market trends.
For example, a study of comparable properties in the area might reveal an average vacancy rate of 5% in the past three years, indicating a potential for similar rates in the future.
Market Analysis for Rental Properties
A comprehensive market analysis is crucial for successful rental property investment. Understanding local rental trends, competition, and tenant demographics provides valuable insights into potential profitability and risk assessment. This analysis allows investors to make informed decisions about pricing, property management strategies, and long-term investment plans.Thorough research into local rental markets, including comparable listings, demand factors, and regulatory environments, is essential to evaluate the viability of a rental property investment.
By understanding the nuances of the local market, investors can adjust their strategies and maximize returns.
Methods for Researching Local Rental Markets
Understanding the local rental market requires a multifaceted approach. Publicly available data sources, such as online real estate portals, government websites, and local newspapers, are excellent starting points. These sources often provide aggregate rental data, allowing for a broad overview of current market trends. In-depth analysis often requires more specific data, and conducting field research, such as visiting properties in the target area, can provide crucial context and firsthand insights.
Talking with local real estate agents and property managers can yield valuable information regarding current tenant preferences, pricing strategies, and competitive landscapes. Furthermore, analyzing recent sales data of comparable properties can help establish a reasonable value range.
Analyzing Comparable Rental Listings
Identifying and analyzing comparable rental listings is a critical component of market analysis. This involves locating properties with similar characteristics to the target property, including size, features, location, and amenities. Key metrics to consider when evaluating comparable listings include rent amounts, lease terms, tenant profiles, and the time required to lease the property. A thorough comparison will highlight common pricing trends and provide a baseline for evaluating the potential profitability of the target property.
For example, a three-bedroom house in a specific neighborhood, with similar amenities and condition, can be used to gauge a fair rental price.
Factors Influencing Rental Demand and Pricing
Numerous factors influence rental demand and pricing in a given market. Economic conditions, such as employment rates, income levels, and local economic growth, directly affect demand. The availability of comparable housing options and the overall supply and demand balance are significant determinants. Location, proximity to amenities like schools, parks, shopping centers, and public transportation, greatly influences demand and, consequently, rental rates.
Furthermore, the quality and condition of the property itself, including its amenities and overall appeal, can directly impact pricing.
Assessing the Local Competition in the Rental Market
Understanding the local competition in the rental market is essential for strategic planning. Identifying direct competitors, those offering similar properties in the same area, and indirect competitors, such as alternative housing options like vacation rentals or shared housing, is crucial. By understanding the types of properties being offered and their pricing strategies, investors can develop competitive pricing and marketing strategies.
This knowledge is vital to effectively position the property and attract desirable tenants.
Studying Local Regulations and Zoning Laws
Local regulations and zoning laws play a significant role in rental property investment. These regulations often dictate the types of properties that can be built, renovated, or maintained. Zoning ordinances can impact the permitted use of land, allowable density, and building codes. It is imperative to thoroughly research and understand these regulations to avoid potential legal issues and ensure compliance.
These regulations can have a direct impact on the profitability and long-term viability of the rental investment.
Comparing Neighborhoods within a City
| Neighborhood | Average Rent | Rental Vacancy Rate | Tenant Demographics | Local Regulations |
|---|---|---|---|---|
| Downtown | $2,500 | 2% | Young professionals, families | Stricter building codes |
| Uptown | $1,800 | 5% | Families, students | Moderate building codes |
| Westside | $1,500 | 8% | Lower income families | Relaxed building codes |
This table provides a comparative overview of different neighborhoods within a city, highlighting average rent, vacancy rates, tenant demographics, and local regulations. These factors are crucial for understanding market differences and tailoring investment strategies to specific neighborhoods.
Assessing the Demographics of the Target Tenant Market
Understanding the demographics of the target tenant market is essential for successful property management. This involves analyzing factors like age, income, family size, and occupation of potential tenants. This information allows for more targeted marketing strategies and the development of amenities that resonate with the specific tenant base. By understanding the preferences and needs of the target market, investors can create a more appealing and profitable investment.
Property Condition Assessment
Thorough evaluation of a rental property’s condition is critical for accurate valuation and informed decision-making. Understanding the property’s physical state, including its structural integrity and systems, is essential to predict potential maintenance costs and estimate the overall return on investment. This assessment allows for realistic budgeting and helps avoid costly surprises after the property is acquired.A comprehensive property condition assessment goes beyond just visual inspection.
It involves a systematic evaluation of the property’s physical attributes, including its structural components, mechanical systems, and potential environmental hazards. This detailed analysis is crucial for establishing a clear understanding of the property’s present state and future maintenance requirements.
Importance of Physical Inspections
Physical inspections are fundamental to property evaluation. They provide a first-hand look at the property’s current condition, allowing for the identification of any existing damage, wear and tear, or potential issues. This visual examination is crucial for determining the property’s overall condition and its suitability for rental purposes. Detailed records of these inspections provide a benchmark for future comparisons and help to track the condition of the property over time.
Assessing Structural Integrity
Thorough structural assessments involve careful examination of the foundation, walls, roof, and other critical components. Inspectors should examine for signs of settling, cracks, water damage, or any other issues that could compromise the structural integrity of the property. A professional structural engineer or qualified inspector should be consulted for a detailed assessment, particularly when there are concerns about structural stability.
This assessment helps identify potential long-term problems and associated costs.
Identifying Potential Repairs and Maintenance Needs
Identifying potential repairs and maintenance needs involves a careful examination of all aspects of the property. This includes inspecting for issues such as loose or damaged fixtures, peeling paint, worn flooring, and other signs of wear and tear. For example, a leaky faucet might indicate a more significant plumbing problem requiring replacement of pipes or fixtures. Detailed documentation of these issues, along with estimated repair costs, is essential for informed decision-making.
Evaluating Property Systems
Evaluation of the property’s systems (plumbing, electrical, HVAC) is vital for understanding the property’s functionality and potential maintenance needs. A faulty HVAC system could lead to high energy costs and tenant discomfort. Inspectors should verify the proper functioning of these systems, identifying any potential issues, and recording any necessary repairs or replacements. This includes testing for water leaks, checking electrical wiring for damage or safety hazards, and ensuring the HVAC system is operational and properly maintained.
Table of Potential Property Damage and Impact on Value
| Type of Damage | Description | Impact on Value ||—|—|—|| Foundation Issues | Cracks, settling, or structural damage to the foundation. | Significant negative impact, potentially requiring extensive and costly repairs, reducing the property’s value considerably. || Roof Leaks | Water damage to interior walls, ceilings, or floors. | Moderate to significant negative impact, depending on the extent of damage, potentially requiring costly repairs and affecting the property’s marketability.
|| Plumbing Issues | Leaky pipes, clogged drains, or malfunctioning fixtures. | Moderate negative impact, potentially leading to costly repairs and impacting tenant comfort and satisfaction. || Electrical Issues | Faulty wiring, damaged outlets, or inadequate electrical service. | Moderate to significant negative impact, potentially causing safety hazards and requiring costly repairs. || HVAC Issues | Malfunctioning or outdated HVAC system.
| Moderate to significant negative impact, affecting tenant comfort and increasing energy costs. |
Identifying and Assessing Environmental Concerns
Identifying and assessing environmental concerns such as asbestos and lead paint is crucial. Asbestos, a known carcinogen, might be present in older properties in insulation or other materials. Lead paint is another concern in older homes and can pose serious health risks. A qualified professional should be consulted to conduct thorough testing and provide appropriate remediation recommendations. These concerns can significantly impact the property’s value and necessitate costly remediation measures.
These assessments can be vital for determining the property’s suitability for rental purposes and mitigating potential health risks for tenants.
Legal and Regulatory Considerations
Thorough understanding of legal and regulatory frameworks is crucial for successful rental property investment. Navigating landlord-tenant laws, zoning regulations, and building codes ensures compliance and mitigates potential disputes. This section delves into these critical aspects, providing a comprehensive overview of the legal landscape impacting rental properties.Rental properties are subject to a complex web of regulations, ranging from local building codes to state-specific landlord-tenant laws.
Failing to comply with these regulations can result in significant penalties, including fines, legal action, and even property seizure. Careful attention to these details is paramount to protect the investment and maintain a smooth operation.
Landlord-Tenant Laws
Landlord-tenant laws vary significantly by jurisdiction. These laws Artikel the rights and responsibilities of both landlords and tenants, covering issues such as lease agreements, security deposits, eviction procedures, and maintenance responsibilities. Understanding these nuances is essential to avoid potential legal complications.
Legal Requirements for Rental Properties
Rental properties must meet specific legal requirements, including adherence to local zoning regulations, building codes, and safety standards. These requirements often pertain to property maintenance, safety features, accessibility, and compliance with fair housing laws. Non-compliance can lead to costly penalties and legal disputes.
Zoning Regulations and their Impact on Rental Properties
Zoning regulations dictate the permissible land uses in a specific area. These regulations can significantly impact the suitability of a property for rental purposes, as they often prescribe permitted density, building size, and the type of occupancy allowed. Violating zoning regulations can lead to legal action and property restrictions.
Local Building Codes and Permits
Local building codes dictate the standards for construction, maintenance, and safety of rental properties. Obtaining necessary permits for renovations or alterations is crucial to avoid legal issues. Strict adherence to building codes ensures the safety and habitability of the property.
Common Legal Disputes Related to Rental Properties
Common legal disputes often arise from disagreements over lease terms, late rent payments, property maintenance, and eviction procedures. These disputes can be costly and time-consuming to resolve, highlighting the importance of clear communication, thorough documentation, and adherence to legal procedures.
Table of Common Landlord-Tenant Laws in Different Regions
| Region | Key Landlord-Tenant Law Examples |
|---|---|
| United States (California) | Specific rules regarding security deposits, lease terms, and eviction procedures. |
| United States (New York) | Detailed regulations on rent increases, notice periods, and tenant rights. |
| United Kingdom | Protection for tenants against unfair eviction and assured shorthold tenancies. |
| Canada (Ontario) | Specific regulations on rent control, landlord responsibilities, and tenant rights. |
| Australia (New South Wales) | Regulations governing lease agreements, repairs, and dispute resolution. |
Note: This table provides a limited overview. Laws are complex and subject to change. Consulting with legal professionals is highly recommended.
Risk Assessment and Mitigation
Thorough risk assessment is crucial for successful rental property investment. Identifying potential issues and developing mitigation strategies safeguards the investor’s financial interests and ensures the smooth operation of the property. A comprehensive approach to risk management considers various factors, from tenant behavior to natural disasters, ultimately leading to a more stable and profitable venture.Identifying potential risks requires a proactive and detailed analysis.
This involves evaluating historical data, local market trends, and the specific characteristics of the property. For example, a property located in a flood-prone area carries a higher risk of water damage compared to one in a less susceptible region. Understanding these risks allows investors to implement preventative measures and build contingencies into their financial projections.
Methods for Identifying Potential Risks
Analyzing historical data, such as eviction rates, property damage reports, and tenant complaints, provides valuable insights into potential issues. Scrutinizing local market trends, including changes in rental rates, vacancy rates, and demand, is equally important. Furthermore, understanding the specific characteristics of the property, such as its age, condition, and location, can highlight vulnerabilities.
Strategies for Mitigating Risks
Effective risk mitigation strategies aim to reduce the likelihood of negative events and minimize their impact. Implementing robust tenant screening procedures, securing comprehensive insurance coverage, and developing emergency response plans are key components of a comprehensive risk management strategy. Maintaining a well-maintained property, through regular inspections and proactive repairs, further reduces potential risks.
Tenant Screening Procedures
Rigorous tenant screening procedures are essential for minimizing the risk of problematic tenants. This involves verifying rental history, creditworthiness, and employment stability. Thorough background checks, including criminal record checks, are also crucial for evaluating potential tenants. Reference checks from previous landlords and employers provide additional context, offering a more complete picture of the applicant. By implementing a structured tenant screening process, investors can minimize the risk of evictions and property damage.
Common Risks and Mitigation Strategies
- Eviction Risk: Thorough tenant screening, clear lease agreements outlining consequences, and prompt action in case of violations are critical to mitigating the risk of eviction. Maintaining a positive landlord-tenant relationship through clear communication and responsive maintenance are also crucial factors.
- Property Damage: Implementing robust preventive maintenance, establishing clear lease agreement provisions for damage responsibility, and encouraging tenants to report maintenance needs proactively can significantly reduce property damage risk. Regular inspections, and responsive repairs, can further contribute to preventing future damage.
- Vacancy Risk: Maintaining a well-maintained property, offering competitive rental rates, and utilizing effective marketing strategies to attract qualified tenants are key to minimizing vacancy risk. Ensuring timely lease renewals and proactive tenant communication can help retain existing tenants.
Risk Assessment Table
| Risk Type | Description | Mitigation Strategies |
|---|---|---|
| Eviction | Tenant defaults on rent or violates lease terms. | Thorough tenant screening, clear lease agreements, prompt action for violations. |
| Property Damage | Tenant causes damage to the property. | Preventive maintenance, clear lease agreement provisions, prompt repairs. |
| Vacancy | Property remains unrented for extended periods. | Competitive rent rates, effective marketing, tenant retention strategies. |
| Natural Disasters | Damage to the property from natural events. | Insurance coverage, appropriate building codes, regular inspections, emergency plans. |
Evaluating Property Exposure to Natural Disasters
Assessing a property’s vulnerability to natural disasters, such as floods, earthquakes, or wildfires, is essential. Factors like location, flood zones, seismic activity, and proximity to wildfire-prone areas need careful consideration. Historical data on natural disasters in the area, along with local building codes, provide insights into potential risks. Evaluating the property’s structural integrity, particularly in relation to the potential disaster, is also critical.
Comprehensive insurance coverage tailored to the specific risks is also crucial.
Comparative Analysis and Valuation
A comprehensive analysis of rental properties necessitates a thorough understanding of various valuation methods. Different approaches offer unique insights, each with strengths and weaknesses, enabling investors to make informed decisions. Careful consideration of these methods is crucial for accurate property valuation and successful investment strategies.Different valuation methods provide varying levels of precision and detail. The choice of method depends on the specific property, available data, and the investor’s objectives.
Selecting the most appropriate method ensures a sound basis for investment decisions.
Valuation Method Comparisons
Understanding the strengths and weaknesses of different valuation methods is critical for accurate property valuation. This comparison helps investors determine which method best suits their needs and circumstances.
- Discounted Cash Flow (DCF) Method: This method projects future cash flows from the property and discounts them back to their present value. It accounts for the time value of money, a fundamental principle in finance. The DCF method considers factors like rental income, expenses, and potential capital improvements, providing a detailed assessment of the property’s future profitability. This approach is often used for more complex investment analyses and is crucial for long-term investment decisions.
For example, a property projected to generate $10,000 in annual rental income, with an estimated $2,000 in annual expenses, and a discount rate of 8%, will have a different present value calculation than one with an estimated $5,000 in annual income and $1,000 in annual expenses.
- Comparable Sales Analysis: This method evaluates the property by comparing it to similar properties that have recently sold in the same market area. This approach considers factors like size, location, condition, and amenities to determine a fair market value. The comparable sales analysis is useful for identifying market trends and establishing a reasonable value range for the subject property.
For example, if three similar properties in the same neighborhood sold for $200,000, $210,000, and $220,000, the comparable sales analysis suggests a market value range for the subject property. This method is often used as a primary valuation tool, especially when sufficient recent sales data are available.
Discounted Cash Flow (DCF) Method
The DCF method is a valuation technique that estimates the present value of future cash flows generated by an asset. It’s particularly relevant for rental properties because it considers the income stream over time. Understanding this method allows for a more comprehensive assessment of the property’s long-term potential.
PV = CF1/(1+r) 1 + CF 2/(1+r) 2 + … + CF n/(1+r) n
Where:
- PV = Present Value
- CF t = Cash Flow in period t
- r = Discount Rate
- n = Number of periods
Comparable Sales Analysis
Comparable sales analysis involves identifying and analyzing similar properties that have recently sold in the same market area. This method provides a strong indication of the market value for the subject property.
- Data Collection: This includes gathering information on recent sales of similar properties, considering factors like size, location, condition, and amenities.
- Data Analysis: This process involves adjusting the sale prices of comparable properties to account for differences in characteristics relative to the subject property.
- Value Estimation: A range of values is derived from the analyzed comparable sales data, providing a realistic valuation for the subject property.
Example of Valuation Techniques
Using a DCF method, a rental property with projected annual cash flows of $15,000 for the next 5 years, and a discount rate of 10%, will have a present value significantly different from a property with $10,000 annual cash flows. Using comparable sales analysis, a property with two bedrooms and two bathrooms, located in a desirable neighborhood with recent sales data, will have a different estimated value compared to a property with one bedroom and one bathroom in a less desirable location.
Factors Influencing Rental Property Value
The value of a rental property is influenced by a multitude of factors. These factors, which can be categorized into economic, geographic, and property-specific characteristics, collectively determine the property’s market value.
| Category | Factors |
|---|---|
| Economic | Interest rates, local employment rates, economic growth |
| Geographic | Location, proximity to amenities, transportation, crime rate |
| Property-Specific | Size, condition, number of bedrooms/bathrooms, amenities, age, and square footage |
Wrap-Up
In conclusion, successful rental property analysis requires a multi-faceted approach encompassing financial modeling, market research, and meticulous property inspections. This guide has provided a comprehensive overview of the critical factors involved, from understanding local market dynamics to assessing potential risks. By considering the multifaceted elements discussed, investors can make strategic decisions and build a solid foundation for long-term rental property success.
Questions and Answers
What are the common types of rental properties?
Rental properties can include single-family homes, apartments, and commercial spaces, each with unique considerations for analysis.
How can I estimate the operating expenses of a rental property?
Operating expenses include items such as property taxes, insurance, maintenance, and potential vacancy periods. Thorough research and historical data are essential for accurate estimations.
What are some common legal disputes in rental properties?
Common disputes include lease violations, late rent payments, and issues related to property maintenance. A thorough understanding of landlord-tenant laws is crucial to avoid these issues.
How can I assess the impact of vacancy rates on profitability?
Vacancy rates directly affect rental income. Analyzing historical data and current market trends will help in understanding and mitigating this risk.
What are some examples of different financial models for property valuation?
Different models, such as discounted cash flow (DCF) and comparable sales analysis, provide various perspectives on property value. Understanding the strengths and weaknesses of each model is crucial.
