Rental Appraisal 101

Monday, April 2, 2012

If you are in the process of investigating or bring up to date how much rent you can get for your investment property, an expert appraisal is the best way to go. But what should you expect to receive from a rental appraisal and how to evaluate if you have received good service or the property manager is sweet-talking you giving you inflated rents just to get the management of your property?

Good rental appraisers have experience. They know the market. When appraising your property, they will consider comparable properties that they currently manage, similar properties in the area and current rental market trends. The main factors that will affect rental value are the location of the property, condition of the property or features or lack of thereof.

In addition to evaluating the house, the neighbourhood is also evaluated. Factors noted include: distance to employment centres, access, number of rental properties, marketing times, stability of the neighbourhood and any other items that may affect how tenants perceive the area. The analysis of the area is important because you can improve the condition of the house, but it would be very difficult to improve the condition of the neighbourhood.

The rent analysis determines the Gross Rent Multiplier, which is the buying price divided by the gross annual rent. An investment property that was acquired for $400,000 then rented for $350 per week would have a GRM of 22 (400,000/[350x52weeks])=22.

But just knowing a rental property's GRM means little by itself, which leads us to the next point: a good rental appraiser will know the GRM of similar properties in an area and they can objectively determine the best possible rental in line with the recent sales of other rental properties in the area. There is no guess-work.

A realistic appraisal is essential to ensure your property will be let promptly and give you the best returns. Adelaide Residential Rentals has an extensive database of rental properties all over Adelaide. Our Portfolio Managers have over 25 years experience in Property Management, so the next time you need an expert rent appraisal, contact us on 8404 3111.

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