Skip to main content

Property Management Blog

What's Considered in a Rental Valuation?

What's Considered in a Rental Valuation?

Rent is something that a lot of people rely on. With housing prices being so expensive, nearly 44 million households in the United States have turned to renting.

As a property owner, that means that you have a large audience to rent out your apartments to. However, you have to keep in mind that a lot of renters are going to have a budget.

Because of this and the fact that you need to make money as a real estate investor, you should conduct a rental valuation of your property.

What is a rental property valuation? What goes into a property valuation?

This is your guide.

Compare Apartment Prices

The first thing you can do as part of a rental valuation is to compare your apartments to ones that are nearby. Do not just do this with any apartment.

Ideally, these should be apartments that are in the same neighborhood as yours. They should also be the same size, have the same amount of bedrooms and/or bathrooms, built around almost the same time, and more.

In the United States, the median rent is over $2,000 per month. However, that does not mean that someone in rural Alabama is going to pay that much. It also means that someone in New York City would get a bargain at that price.

You want to see what a similar apartment is going for on the open market. Once you discover this, you can get a better idea of what people are willing to pay for your apartment.

Gross Rent Multiplier

Another way you can do this is use how much you paid for the property and how much you profit from rent in a year. Then, divide the two numbers.

When you do this, you will get how many years it will take to start making a profit off of this property. Keep in mind that this does not include other expenses that we will talk about below.

However, it should give you an idea of if that timeline is acceptable or not.

Consider Your Expenses

Finally, do not forget to factor in how much it costs to keep your apartment building running. These can be things such as utility bills, maintenance fees, insurance costs, property taxes, and more.

Add up all of these expenses and look closely at what this total number is. Then, charge rent accordingly.

Get Help With Your Rental Valuation

These are some of the biggest factors that come into play during a rental valuation. The main thing you want to do is take a look at your competition and see what they are charging on the open market.

On top of this, you need to figure out how many years it will take to make a profit on your current rent. Plus, you cannot forget about the expenses it takes to keep your apartment building running.

Do you need help with your property valuation? Message us here with your questions.