Rental Property Valuation—Analysing an Investment Property and Property Valuation Methods

Rental property valuation is an essential aspect of real estate investing. This process helps you identify a property’s selling price, market price, and rental value, irrespective of  whether it is intended for residential, commercial, or industrial purposes. But how do you do it, and why is it important?

The different rental property valuation methods

Property valuation is necessary because a property’s price can change over time. If you are a landlord, this process will help you find the most appropriate market rental rates for your property, ensuring a reasonable profit.

Note that property valuation can only be conducted by an expert. Professional property valuators have needed experience in marketing analysis, location analysis, and guidance values, allowing you to obtain an accurate report.

Here are some of the most common rental property valuation methods used by professional valuators:

·         Sales comparison approach

This method, used to evaluate investment properties, is more popular among real estate investors. A property valuator will look at the sale prices of recently sold properties in the same area to obtain more accurate results.

·         Gross rent multiplier approach

How much rental income can your property generate in a year? If you find the answer, you can use this number to obtain the property’s value. The gross rent multiplier approach is one of the fastest valuation methods used by investors; however, it does not factor in other expenses like property taxes, insurance, and vacancies.

·         Income approach

Lastly, the income approach uses a property’s net operating income and capitalisation rate to obtain the rental value. This method can quickly give you an estimate; however, it’s still best to combine it with other approaches for better accuracy.

Would you like to get an accurate valuation of your rental property? Work with an experienced rental valuator offering a wide range of services, including online valuation, remote valuation, or inspection valuation.

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