Single Family Rental Market Analysis: What You Need to Know in 2022 (2023)

Single family rentals are the fastest-growing housing market segment in the US. Here’s how investors can take advantage of this opportunity.

Table of Contents

  1. What Are Single Family Homes?
  2. 7 Reasons to Invest in Single Family Homes in 2022
  3. Are There Risks in Renting Out Single Family Homes?
  4. What is a Good ROI for Single Family Home Rentals?
  5. What’s Next

While the pandemic has spurred exponential growth in the single family home for rent market, it is not the only reason.

There’s more to single family rentals than meets the eye, as we’ll see in this single family rental market analysis. We will also discuss the risks and opportunities associated with this segment of the housing industry.

What Are Single Family Homes?

The typical single family house for rent is a detached, primary residence that stands on its own lot and has its own kitchen, utilities, and yard. It does not share walls, yards, or stairs with its neighbors.

Single family houses usually:

  • Emphasize ownership. You own both the land and the house sitting on it.
  • Sit on larger parcels of land. You can use the extra space for gardens, patios, or children’s play areas.
  • Offer more privacy because it does not share amenities.
  • Reduce noise from neighboring buildings, providing dwellers with peace and quiet.
  • Allow for more exterior customizations, including unique landscaping and adding Accessory Dwelling Units (ADUs).
  • Less restrictive Homeowners Association (HOA) rules provide more freedom to single family owners and renters to decorate their homes however they like.

The US Census Bureau also defines any detached, semi-detached, townhouse, or row house as a single family home if it:

  • Has a ground-to-roof wall separating it from other buildings
  • Doesn’t share air conditioning, heating, or utilities
  • Doesn’t have independent dwelling units above or below it

So, how attractive are single family rentals for real estate investing in 2022? And what does the housing market 2022 tell us about the future of American rental homes?

Related: The Complete Guide to Investing in a Single Family Home in 2021

Single Family Rental Market Analysis: What You Need to Know in 2022 (1)

Single family homes are the most sought-after property types by those who wish to own a home or even rent one.

7 Reasons to Invest in Single Family Homes in 2022

With rising mortgage rates and rumors of a ‌housing market correction in 2022, should you invest in real estate rentals?

Is investing in single family homes for rent more profitable than other strategies?

As this single family rental market analysis will reveal, there are a few surprises as well as some century-old habits resurfacing in the rental market.

1. Americans Love Single Family Homes

This will not change anytime soon.

In a survey of over 10,200 Americans, Pew Research revealed in July 2021 that 60% of respondents would rather live in “a place where the homes are large and farther apart, even if schools, stores, and restaurants were a few miles away.” In fact, more people prefer to live in larger single family housing in 2021 (60%) than in 2019 (53%).

This confirms the findings of a 2017 survey by Trulia that most Americans regret not buying a larger home. That is despite half of Americans saying affordable housing is a major problem affecting their communities.

Related: 8 Best Markets for Investing in Single Family Homes for Sale in 2022

2. Single Family Rentals Are Offering the Best Returns

According to Hoya Capital Real Estate, single family rental properties are the best-performing property class since 2019. In 2020, single family rentals had nearly equal net operating income margins to apartments.

In 2021 alone, the segment gained about 40%. According to the data, historically low supply and high demand driven by demographics and the pandemic propelled the trend.

In its single family rental market analysis, NexMetro Communities found that renters in single family homes also stay longer and have lower delinquencies. The firm reported its renter retention rates rose by 20% since the beginning of 2020.

There’s something else: single family homes have near-excellent investment and development prospects as well. The Urban Land Institute (ULI) reported this in its 2022 report, based on a survey of 2,000 real estate developers, private property owners, advisors, and private equity investors.

3. Demand for Single Family Rentals Continues to Rise

A growing number of individuals and households are choosing to rent instead of own a house in America. Among the primary motivations for renting single family homes is that they do not require long-term financial obligations.

Picture this:

  • Nearly 6% of finished lots purchased nationwide in Q4 2021 were for rental-house projects, according to John Burns Real Estate Consulting. That number was just 3% a year earlier.
  • The US housing industry added 30% more built-to-rent single family homes between 2019 and 2020.
  • This segment makes up 6% of new homes being built in the US today. Analysts expect the number to double in the next 10 years.

As older Millennials grow their young families, this trend will continue. To accomplish that, they are moving from apartments to larger single family homes for rent.

The John Burns Single Family Rental Survey confirmed this in Q3 2021. Its US rentals data shows that about 50% of tenants who moved into single family homes used to live in apartments.

Another factor propelling single family renters is people are moving more often. As a result, more people are increasingly considering renting as a flexible option. They also want to avoid the costs of frequent home transfers.

4. Millennials Will Drive Future Demand for Single Family Rental Property

Millennials are also increasingly renting single family units as starter homes. Thanks to huge student loans, the skyrocketing cost of living, and record-high home prices, younger people want to experience single family living without the financial burden of ownership.

Also, developers told a PwC survey that more people want real, walkable neighborhoods filled with amenities. That way, they don’t have to use a car to get to work and back home. Renting a single family home close to most amenities may fulfill these aspirations for younger people.

Still, a chunky 43% of Gen Zers said they wanted to rent single family houses after graduating from university. The Arbor Realty Trust Single Family Rental Investment Trends Report for Q3 2021 shows that short-term economic factors are driving demand for single family rental properties, including professionally managed ones.

That makes sense, according to LendingClub. Its May 2022 report reveals that 58% of adult Americans are living paycheck to paycheck. That’s a 4% uptick from May 2021. This may suggest more people will opt to rent in America instead of taking on mortgages with high monthly payments.

Tragically, 30% of Americans earning $250,000 or more and 36% who earn $100,000 are struggling as well, according to a Willis Towers Watson survey. So, sad as it might be, young Americans may not be the only ones renting single family homes in the future.

5. Investor Interest in Single Family Rental Properties Is Soaring

A growing number of institutional investors taking an interest in single family rental properties is another sign the rental market is more appealing than ever.

Picture these investment highlights from the housing market 2022:

  • Wall Street set up an $85 billion-dollar chest to invest in single family rental properties. It had already spent over 20% of the fund by January 2022.
  • JP Morgan Asset Management is now building thousands of rental single family homes with American Homes 4 Rent.
  • Blackstone purchased Home Partners of America, a US rent-to-own company, for $6 billion in 2021.
  • Invesco, through Mynd Management, is spending $5 billion over three years to buy 20,000 single family rental homes.
  • Partners Group purchased single family rental homes worth $1 billion across 17 Sun Belt states in Q1 2022.
  • In the same quarter, 13,000 new single family homes were started as rentals, an increase of 63% from a year ago, according to the National Association of Home Builders.

This interest is partly due to investors noting that single family rentals were more resilient against the pandemic than other segments, such as offices and stores.

6. Single Family Rental Rates Are Increasing

The latest data from CoreLogic’s single family rental market analysis shows that the prices of rent for American rental homes rose 12.6% year-over-year in January 2022. The Sun Belt recorded the biggest increase in rent in America.

The finding notes that single family rents have risen for 10 consecutive years now. But the 12.6% rate is the fastest increase in 17 years. Overall, rent growth at the start of 2022 was three times that recorded in 2021 and four times that recorded in 2020.

Dwellsy, a home rental marketplace, also reported that median rents in February increased 35% year-over-year to $2,160 nationwide.

Rents for single family units have risen along with house prices in recent years. So, as an investor who wants to capitalize on rent growth without paying high home prices, you can buy rundown houses below market rates, fix them up, and rent them out at current rental rates. It’s a straightforward way to profit in the current market.

Or, you can reduce the rent by passing the savings to the tenant. This can encourage long-term occupancy, and, thus, provide you with consistent rental income.

7. There Is an Increase in Non-Traditional Single Family Home Renters

People who can afford to buy a single family home, with or without a mortgage, are also opting to rent single family residences. As some news stories have quoted, this demographic fears housing prices will soon plummet.

They do not want to buy at the peak of the market and see home prices drop a few years later.

To single family rental investors, this marks an opportunity to serve this demographic. Since we might see a market correction over several years, instead of right away, this demographic may be high-quality tenants for the next few years.

However, renting out a single family house isn’t risk-free.

Are There Risks to Renting Out Single Family Homes?

Every investment has its own risks as there are opportunities. Performing a thorough single family rental market analysis will help you identify several concerns you should know. Here’s a quick rundown of the potential risks you’ll want to plan for.

1. In Some Markets, Rental Earnings Are Declining

Here’s what a recent single family rental market analysis found. The average gross rental returns on three-bedroom, single family homes that landlords purchased in 2022 are decreasing in 153 out of 212 US counties. While returns have reduced by just 1% year-over-year, earnings could decline further in segments with already small profit margins, such as markets with median home prices over $250,000.

2. Some Local Markets’ Home Prices Are Outpacing Rent Growth

You’ll need to calculate a healthy price-to-rent ratio when buying a single family house for rental income. As an example, the survey in the previous point showed that homes priced over $500,000 returned the lowest yields (6%), suffered the greatest decline in returns, and had the smallest margins.

3. Markets’ Home Prices Prices Are Also Rising Faster Than Wages

In the same study, only 17 out of 212 counties saw wages rise faster than home prices. Higher home prices increase rents. Yet higher rents are unsustainable where wages are out of whack with local incomes.

4. Investing in a Transitory Market May Lead to Higher Vacancies Later

As noted earlier, most Americans want to experience single family living. But an overwhelming number still prefer to own than rent. So in some markets, such as where people are waiting for home prices to lower before they purchase, rental demand may be transitory.

Fortunately, you can perform a single family rental market analysis in minutes rather than weeks.

For example, you can track and compare market changes in real-time using predictive analytics and real estate comps.

That can help you identify and counter risks in nearby and far-out markets. You do not need to be a big investor to use the tools. You can do the comparisons from anywhere and whenever you want — long before larger REITs do.

To learn more about how we will help you make faster and smarter real estate investment decisions, click here.

Now, every single family rental market analysis covered here suggests that demand for rentals will continue. The question is, what ‌returns can you expect from your rental property?

What Is a Good ROI for Single Family Home Rentals?

For mortgage-financed rentals, you’ll want to aim for a return rate between 8% to 12%. For cash investments, anywhere between 5% and 10% can be a good ROI.

Currently, a solid single family rental market analysis will suggest you to expect a 7% ROI across the board for homes priced at $250,000 and up. Meanwhile, expect 8% returns for homes below $250,000, and 6% for properties with prices over $500,000.

See, there are several factors that influence a rental property’s return on investment. They include rental income, operating expenses, occupancy rate, mortgage rates, property taxes, location, and the type of property you purchase.

Rental property investors also calculate rental returns using metrics like cash-on-cash return, cash flow, net operating income (NOI), and cap rate.

How to Calculate a Rental Property’s Returns

To manually calculate your rental property’s profitability, take the annual return and divide it by your investment cost. The formula for calculating returns on a rental property is:

ROI = (Net Income/Cost of Investment) x 100

For example, a single family home for rent that generates $24,000 in net income with an investment cost of $110,000 would have a ($24,000/$110,000) = 0.218 X 100% = 21.8% ROI.

Alternatively, you can use a robust rental property calculator online.

Related: How to Find Out Your Property’s Earning Potential With an Investment Return Calculator

What’s Next: Invest in Single Family Rental Homes Like a Pro With Mashvisor

The single family rental market is hot right now. Demand will continue to rise, according to the reports covered in this single family rental market analysis.

Yet home prices are also at record highs, fueled by interest rate hikes and inventory shortages. This can eat into your rental property’s return on investment. So, you need to find just the right single family units to turn into profitable real estate rentals.

But, you need to act quickly. Loaded institutional investors are sweeping the US rentals market at full speed.

How do you level the field?

A good rental property calculator can help you find and invest in the right single family home for your needs.

Take Mashvisor’s Rental Property Calculator, for instance. The tool lets you find the right investment based on various criteria, including rental income, occupancy rate, cash flow, budget, and cash on cash return. You can filter, sort, and compare different single family homes side-by-side, analyzing their potential rental income.

You don’t need to drive anywhere to find your next single family home for rent, because Mashvisor lets you search from anywhere, anytime. Don’t take our word for it. Try Mashvisor out for yourself.

Start your free 7-day trial here to explore what premium Mashvisor can do for your single family rental income goals.

Start Your Investment Property Search!

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FAQs

How to do a market analysis for a rent? ›

Rental Market Analysis – How To Conduct It Successfully?
  1. 5 steps of rental market analysis.
  2. Evaluate the neighbourhood. ...
  3. Identify comparable properties in the target area. ...
  4. Calculate the cost per square foot of comps. ...
  5. Manage the rental price. ...
  6. Determine the cost of properties for sale.

How do you quickly analyze a rental property? ›

How to Quickly Analyze Potential Rental Properties
  1. Import Available Property Data From Public Records. ...
  2. Customize Your Financing, Closing Costs, Rent, and Expenses. ...
  3. View Projected Cash Flow, Investment Returns, and Long-term Projections. ...
  4. Put Together an Offer Based on Your Target Investment Criteria.
Feb 7, 2022

What are 3 factors that you should consider when looking for a rental and why are they important? ›

4 Factors To Consider When Choosing A Rental Property
  • Property Management. I put this on the list first because it truly plays a paramount role in the success of your investment. ...
  • Neighborhood. Obviously, location is a huge factor in anything related to real estate. ...
  • Condition. ...
  • Amenities.
Aug 17, 2018

What are the formulas to evaluate a rental property? ›

Also known as GRM, the gross rent multiplier approach is one of the simplest ways to determine the fair market value of a property. To calculate GRM, simply divide the current property market value or purchase price by the gross annual rental income: Gross Rent Multiplier = Property Price or Value / Gross Rental Income.

How do you research a local rental market? ›

What to look for in a local rental market
  1. Neighborhood and home amenities. When purchasing real estate, one of the most important elements to consider is the amenities available in the neighborhood. ...
  2. City and neighborhood statistics. ...
  3. Online listing websites. ...
  4. Government websites. ...
  5. Local real estate agents.
Dec 29, 2022

How to analyze market for Airbnb? ›

Airbnb Market Analysis Summary
  1. Utilize tools such as Airdna to analyze your market.
  2. Join and interact in community Facebook groups.
  3. Analyze the seasonality of your market (High season/ Low season)
  4. Look up important local events so that you can price appropriately.
Oct 5, 2022

What I wish I knew before renting? ›

In our search, we narrowed down ten things we wish we knew before we began our journey a year ago.
  • Make sure you understand exactly what you're paying for. ...
  • Be realistic. ...
  • If something is broken, tell someone immediately. ...
  • Take notice of the location. ...
  • Remember what your priorities are. ...
  • Check out the entire building.
Aug 14, 2018

When searching for a rental property what is the most important factor to consider? ›

The adage "location, location, location" is still king and continues to be the most important factor for profitability in real estate investing. Proximity to amenities, green space, scenic views, and the neighborhood's status factor prominently into residential property valuations.

What are two important things to consider when you decide how much rent to charge? ›

Major Factors for Calculating Rental Rate
  • Property Worth. Often, you can use your overall property worth to get a base rent value. ...
  • Local Rent. ...
  • Consider Demand. ...
  • Cover Your Expenses. ...
  • Rent-Boosting Features.
Feb 15, 2019

What is the 1 rule in real estate? ›

What Is The 1% Rule In Real Estate? The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.

What method is commonly used to value rental property? ›

The gross rent multiplier (GRM) approach values a rental property based on the amount of rent an investor can collect each year. It is a quick and easy way to measure whether a property is worth the investment.

What is a good cap rate for rental property? ›

Market analysts say an ideal cap rate is between five and 10 percent; the exact number will depend on the property type and location. In comparison, a cap rate lower than five percent denotes lesser risk but a more extended period to recover an investment.

What is the 5 rule when comparing renting vs buying? ›

Multiply the value of the home by 5%, then divide that number by 12 to get your breakeven point. If the monthly rent on a comparable home is below the breakeven point, it makes financial sense to rent. If the monthly rent is higher than the breakeven point, it makes financial sense to buy.

How do you analyze cash flow on a rental property? ›

Our property passes the test of the 1% Rule. The 50% Rule states that a rental property's net cash flow should be at least 50% of the gross rent less the mortgage payment (P&I): Net cash flow = (Gross rent x 50%) – Mortgage P&I. ($12,000 gross annual rent x 50%) - $4,296 mortgage P&I = $1,704 per year.

What questions to ask about rental properties? ›

12 questions to ask a landlord before renting
  • How long is the lease term? ...
  • What's included in the rent? ...
  • When is rent due and how do I pay it? ...
  • Is the security deposit refundable? ...
  • Is renters insurance required? ...
  • How much notice do I give before vacating? ...
  • What's the penalty for breaking my lease?

What is a comparative market analysis for a rental property? ›

A comparative market analysis (CMA) is an estimate of a home's price used to help sellers set listing prices and help buyers make competitive offers. The analysis considers the location, age, size, construction, style, condition, and other factors for the property and comparables.

What is the best tool to analyze Airbnb? ›

If you're looking for the best Airbnb analytics tool, then Mashvisor is the answer you're looking for. Mashvisor is a real estate investment platform designed to help investors find the right traditional or Airbnb rentals for sale.

What is the best software to analyze Airbnb? ›

Guesty. The first option on our list is Guesty. Guesty is a very powerful vacation rental property management software that is best suited for Airbnb properties and other short-term rental platforms. Guesty is able to integrate with a large array of travel agencies and solutions, like Airbnb, Expedia, and TripAdvisor.

How do you know if a property would be a good Airbnb? ›

  • Pick Your Location. As with any investment property, location is the most important factor when selecting your perfect short-term rental. ...
  • Beware Short-Term Rentals Regulations. ...
  • Investment Property Type. ...
  • Check Your Budget and Expenses. ...
  • Airbnb Performance Prediction.
Apr 23, 2019

What makes me a great tenant answer? ›

The ability and willingness to: pay rent, care for the rental property, avoid creating disturbances, and avoid drama. Good tenants care enough to at least try to make a good impression. They are friendly, show up on time, display some level of excitement for the rental property, and are respectful to the landlord.

What are three questions you should ask yourself to make sure you are ready to rent? ›

List at least three questions you should ask yourself to make sure you are ready to rent. do you have enough money and income to pay for all the costs? is the place you can afford safe? do you have a good credit score?

What are the three most important words in real estate? ›

To achieve those goals, the three most important words in real estate are not Location, Location, Location, but Price, Condition, Availability.

How do you know if a rental property is a good investment? ›

Top 10 Features to Consider
  1. Neighborhood. The neighborhood in which you buy will determine the types of tenants you attract and your vacancy rate. ...
  2. Property Taxes. ...
  3. Schools. ...
  4. Crime. ...
  5. Job Market. ...
  6. Amenities. ...
  7. Number of Listings and Vacancies. ...
  8. Average Rents.

What are the three most important things in real estate? ›

The three most important factors when buying a home are location, location, and location. Too often I hear people talking about making decisions based on the home itself, instead of the location, and that is a mistake. What is it about the location that makes it so vital to real estate investing?

What is the formula to calculate rental fee? ›

It is a simple rule that calculates 1% of the property value as rent. For example, if your property's value is $3,000,000, you will charge $30,000 as rent per month. An important aspect to consider under this rule is that the rent charged should be greater than or equal your mortgage payment.

What is a good rule of thumb when determining rent for a budget? ›

A popular standard for budgeting rent is to follow the 30% rule, where you spend a maximum of 30% of your monthly income before taxes (your gross income) on your rent. This has been a rule of thumb since 1981, when the government found that people who spent over 30% of their income on housing were "cost-burdened."

What factors affect the cost of renting? ›

If you want to hear even more detail, watch my video above.
  • Location, Location, Location. This is the most important factor affecting rental rates for an investment property and real estate in general. ...
  • Number of Bedrooms. ...
  • Appliances and Other Amenities. ...
  • Allowing Pets. ...
  • Curb Appeal and Condition.
Oct 16, 2018

What is the 80% rule in real estate? ›

The rule, applicable in many financial, commercial, and social contexts, states that 80% of consequences come from 20% of causes. For example, many researchers have found that: 80% of real estate deals are closed by 20% of the real estate teams. 80% of the world's wealth was controlled by 20% of the population.

What is the 50% rule of thumb in real estate? ›

According to the rule, 50 percent of the rental income should be designated to expenses and therefore not considered when comparing potential profits against the monthly mortgage or loan repayments. The purpose of the 50% rule is to help investors make quick, informed decisions about rental properties.

What is the 4 3 2 1 rule in real estate? ›

4-3-2-1 rule

The front quarter of the standard site receives 40% of the total value. The second quarter receives 30% of the total value. The third quarter receives 20% of the total value; and the rear quarter receives just 10% of the total value.

What does Noi mean in real estate? ›

Net Operating Income, or NOI for short, is a formula those in real estate use to quickly calculate profitability of a particular investment. NOI determines the revenue and profitability of invested real estate property after subtracting necessary operating expenses.

What is the most commonly used method of determining cost for a residential property? ›

Direct comparison is the most common method for estimating land value.

What are the three ways of valuing real estate assets? ›

Three Approaches to Value
  • Cost Approach to Value. In the cost approach to value, the cost to acquire the land plus the cost of the improvements minus any accrued depreciation equals value. ...
  • Sales Comparison Approach to Value. ...
  • Income Approach to Value.

What does a 3% cap rate mean? ›

Cap rates are seen as a measure of risk and return, a “low” cap rate of 3-5% would mean the asset is lower risk and higher value; a “higher” cap rate of 8-10% reflects a lower price, higher risk and higher return.⁶

What is the cap rate 2% rule? ›

This is a general rule of thumb that determines a base level of rental income a rental property should generate. Following the 2% rule, an investor can expect to realize a gross yield from a rental property if the monthly rent is at least 2% of the purchase price.

What does 7.5% cap rate mean? ›

A 7.5 cap rate means that you can expect a 7.5% annual gross income on the value of your property or investment. If your property's value is $150,000, a 7.5 cap rate will mean a yearly return of $11,250.

On which factor of the market analysis should rent be based? ›

Rents are most often based on which factor of the market analysis? occupancy levels.

What is the market analysis of car rentals? ›

Report AttributeDetails
Market size value in 2021USD 103.14 billion
Revenue forecast in 2028USD 141.17 billion
Growth rateCAGR of 4.6% from 2021 to 2028
Base year for estimation2020
10 more rows

What is market effective rent? ›

The Effective Rent is essentially the average lease rate the landlord will achieve when they back out the value of the concessions they gave the tenant.

Is the most important factor in determining the rental price of an apartment? ›

Location, Location, Location. This is the most important factor affecting rental rates for an investment property and real estate in general. The location of a property will immediately establish a baseline rental rate, overall demand and your target market.

What is the single most important factor in determining demand in the real estate market? ›

The primary factor influencing demand for housing is the price of housing. By the law of demand, as price decreases, the quantity of housing demanded increases. The demand for housing also depends on the wealth of households, their current income, and interest rates.

How do you calculate rental income? ›

Lease Agreements or Form 1007 or Form 1025: When current lease agreements or market rents reported on Form 1007 or Form 1025 are used, the lender must calculate the rental income by multiplying the gross monthly rent(s) by 75%. (This is referred to as “Monthly Market Rent” on the Form 1007.)

What is a rental analysis? ›

A rental market analysis gives you a complete picture of how your investment properties (and your portfolio as a whole) fit into the current local rental market.

What is comparative market analysis for rental property? ›

A comparative market analysis (CMA) is an estimate of a home's price used to help sellers set listing prices and help buyers make competitive offers. The analysis considers the location, age, size, construction, style, condition, and other factors for the property and comparables.

What is the market segmentation of car rental? ›

Market Segmentation:

The Car Rental market is segmented based on Application, Rental Category, Car Type, and Region. Based on the segment Application, the market is sub-segmented as Leisure and Commercial. Furthermore, based on the Rental Category, the market is sub-segmented as On Airport and Off Airport.

What is effective rent example? ›

For instance, if a tenant signed a 5 year lease for $20/sf per year, but received a $10/sf tenant improvement allowance and five months free rent, the effective rent would be $16.33/sf ($20 / 12 months = $1.67/month x 5 months free = $8.33 plus $10/sf tenant improvement allowance = $18.33/sf total cost to landlord.

What is effective lease rate analysis? ›

Effective Rental Rate means the dollar amount per square foot computed as follows: (i) total Base Rent over the term described in the proposal or offer, (ii) less the amount of any tenant improvement allowance or the cost of any tenant improvements to be installed by Landlord, (iii) less the amount of any free rent, ...

Why is effective rent important? ›

The purpose of effective rent is to help landlords and tenants compare leases and understand their financial implications. In practice, effective rent is commonly calculated as an average rent. For financial analysis, it is more accurately calculated as an annuity to incorporate the concept of the time value of money.

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