If you want to generate reliable, recurring income, owning rental properties is a great choice. About 36% of households in the US are rental properties.
If you want to build equity and maximize your cash flow, there are a lot of elements to deal with when owning rental properties. One such element is rental valuation, and this will help you get the most out of your rental properties.
So what is rental property valuation, and why is it important? Keep reading to find out.
What Is Rental Property Valuation?
Property valuation is a process that helps determine the market value of a property. Property values fluctuate, so it's important to perform valuation periodically.
For rental properties, things are a bit different. A rental valuation is about determining a suitable rent rate for a property.
If you own a rental property, you should find the rental property value before you start looking for tenants. Knowing the rental value will help you determine how much you should be charging each month. Bear in mind that knowing the actual market value can help with this.
Why Rental Property Valuation Is Important
Any experienced real estate investor knows that every property has a different value. Just because two properties are in the same area or they're the same size, that doesn't mean they're equal. Calculating the exact value of a property will help you make the best investment decisions.
In general, the rental value of a property is about 6%-10% of a property's overall value. If you know the value, you can get an idea of a fair rental price.
As the value of a property changes, so should the rent. Performing periodic rental valuations will allow you to adjust the rental price accordingly so you can keep up with the current market. Note that in most cases, you'll experience market appreciation, so the rental price should go up every year.
A situation may arise and you might need to apply for a mortgage in an emergency. Knowing the property value will make it easier to claim a loan amount. The lender may also ask for a valid property valuation report, so things will be easier if you have this already.
Factors That Impact Property Value
Perhaps the most important factor when it comes to property value is location. It will affect the rental tax rate, rent control, job growth, population, and more. Several other factors will also affect the value.
Property modifications can make a home with more. This includes upgrades such as pools, conservatories, decks, and more.
The age of the property is also important. Newer properties generally need less repair work so they often cost more. Some other factors include:
- Property size
- Property neighborhood
- Market condition
- Property condition
With all these variables, a professional valuation is the only way to get an accurate property value.
Your Rental Valuation
As a passive income investor, getting a rental valuation performed on any properties you own can prove very beneficial. The team at PMI Space Coast can help with this.
We're a full-service property management company and have been in operation for over 20 years. Head over to our Rental Analysis page for your free rental valuation today.
