Determining Rental Value

3 Ways to Determine the Rental Value of a Property Based on Its List Price



With the housing market going topsy-turvy over the last year and half, figuring out the rental value of an investment property can be difficult. Zillow and other online estimates can be outdated and old ways of pricing may not be the most accurate. If you are considering investing in a particular market, it is important to do your homework to determine if the purchase is a sensible one. You may need to look beyond the price per square foot. Keep in mind, this may require some good, old-fashioned detective work.

Interview Property Management Companies

Whether you are choosing to go with a property management company or not, asking them questions about the market is one of the best ways to determine if a property is worth your time. Discuss with them what the rentals have been like over the last year, and when you can, over the last six months. This will give you an estimate of how easy and at what price point similar properties are commanding.

Talk to a Realtor

Realtors can tell you a lot about the community, the most recent price of similar properties and other things planned for the community to determine if there will be a lot of competition for rentals shortly. For example, if you are buying a condominium in a particular area but there is slated to be a new high rise apartment building in the area within the next year, find out what similar units will be asking for in rent.

Consider the X Factor

While the price per square foot is a great launching point in determining the rental value of a unit, consider the amenities and other intangibles that can add value. Things like a doorman building in a city environment, access to gym facilities, outdoor space, new appliances, and even a great layout or view can have positive effects on your ability to command a higher price for your property. These types of comparisons may include a visit to other buildings or single family dwellings to determine how your property compares.

The best advice is to talk to the people on the ground who have seen how the rental market has reacted to the swings of the last year and a half. Sometimes that conversation can be invaluable.