In 2022, the average home sold for over $500,000. Rising home values have made investing in real estate a lucrative endeavor for many people, especially for those who purchase a rental property.
Not everyone understands how to assess their property value, though. It's crucial to set the right rent prices so you can establish a steady stream of passive income.
We've written a brief guide that provides insight into how you can value your investment property. Let's explore the key information you should know about rental valuation.
Sales Comparison Method
This is one of the most common ways landlords assess their rental value. It involves examining recent rental transactions in the local area.
For example, multiple nearby rental properties may have closed for over $600,000. This will give you a starting point regarding how you assess your rental valuation.
Other factors to consider include the location of the property, the number of rental units, and the type of rental property you own. Keep in mind that rental value isn't the same as market value. Its purpose is to determine accurate rent prices.
Multiplier Method
This method isn't as common, but it's sometimes more appropriate than sales comparison. It uses the sales price of similar properties to determine what you should set your rent at.
To calculate this number, you can look at the sales price of a recent transaction and divide the sale price by the property's rental income. This number is known as the rental multiplier.
You can then use this value and multiply it by your rental property's overall value. This will give you its rental value. This method isn't always accurate, and it can sometimes undervalue or overvalue a property.
Work With a Professional
It's crucial to work with a professional to get the best results. They have the tools and resources necessary to guide you through the process.
When looking for someone to hire, consider their past reputation. See what other people have to say about what it was like working with them.
This can significantly help when investing in property. You should also look at their pricing before moving forward. The last thing you want is to encounter financial surprises.
Do they seem communicative and easy to get in touch with? Getting left in the dark after hiring someone can be notably frustrating. It's also recommended to find someone enthusiastic about your project.
You can assess their enthusiasm by seeing how many questions they ask you about your situation. Keep an eye out for fake reviews, as well. These are generally easy to recognize, as they have similar formatting and keywords.
Don't Overlook Rental Valuation
Rental valuation can seem complicated at first, but it's more straightforward than people think. The tips in this guide will help ensure you make the best decision for your needs and generate substantial rental income.
Gates Management and Realty offers premier property management services to our clients. We strive to deliver fast results without sacrificing quality during the process. You can learn more about how we can help when you schedule a consultation today.