When buying property to rent out as a landlord, it is essential to know what you’re getting into. Be sure you explore the details and benefits of rental property appraisal for landlords before the time arrives to ensure that you can get the most out of your investment.
Buying an investment property can be an exciting, emotionally-charged process with lots of components to consider. Among the many considerations, you should also think about property valuation.
Property valuation is important regardless of what kind of owner you are, but it is exceptionally so for a landlord or property investor. Rental property appraisal allows you to learn a variety of useful information that will help you understand how much a property is worth and how much money you can get from renting it out. Accurate property valuation can also help you predict how much your property will appreciate, which can determine how good an investment you’re making.
A property appraisal is typically an easy process. Usually, you or the lender you work with will go through an appraisal management company to schedule an appointment. It can often be scheduled within a few days, and the appraiser is usually in your house for a couple of hours or less. Then, you will typically receive their report within a couple of weeks. This is often a necessary part of the purchasing process, but it can be done again for a variety of reasons.
When You Need a Rental Property Appraisal:
There are several cases in which property appraisal is beneficial to your rental. It is often necessary when purchasing or refinancing a property, applying for loans, or estate planning. It is additionally helpful when deciding how much to charge for rent or establishing a sale price if you choose to sell your rental property. You may also need an appraisal if you come across any issues with your property taxes.
Why Rental Property Appraisal is Important:
Rental property appraisal is important to a landlord or property owner because it helps you make a good investment. Knowing your property’s worth ensures that you will be able to get the most value for your money. It is beneficial for insurance purposes, as well, in that any potential damages to the value will be catalogued based on its initial value.
The value of your property is closely tied to the rent you can charge. If your property is highly valued, you can typically charge higher rent whilst remaining fair and competitive for what you own. Renters will typically choose the lowest-priced property between a set of options in similar locations and with similar features, meaning you need to watch the market closely. Property appraisers take into account the current market when conducting their appraisal, so your value will be accurate for the market you’re in.
Rental income in comparison to the total value of your property, the mortgage, and any other expenses is also important to consider. The worth of your property can also help to determine the health of your investment and whether or not your investment property will appreciate over time.
Factors in Rental Property Appraisal:
When a property is being appraised, there are a variety of factors that will be looked at to assess value. The property’s age, size, and condition can all affect a property’s worth. Location, amenities, any renovations that have been made since construction, and numerous other factors are also relevant to this valuation. Additionally, this is all affected by the market at the time of valuation.
Large, nice homes in or around big cities tend to be worth more than a single apartment in a smaller town. However, this is also affected by the appearance of the house, the amenities it offers, and what part of a town it is in. Location, as is often said, is one of the only factors that cannot be changed when it comes to a property. As such, it is another important factor in the value of a property.
Some easy steps to increase the value of your property include a new coat of paint, simple renovations such as finished basements or attic rooms, or other similar changes. Larger renovations can boost your appraisal value, but smaller renovations may have a much better ROI than large, expensive renovations.
Learn more: 9 Tips Investors Can Use for a Higher Appraisal Value
It is vital to evaluate the potential ROI of an upgrade (both for your rental property’s appraised value and for the value of your future tenants) before making the commitment to renovate or upgrade. For example, adding on more usable square footage can also help with an appraisal, but it is important to consider rental comps in your area and the overall cost of any renovations or upgrades.
Final Thoughts:
Whether you are buying your first rental or your hundredth, a property appraisal is a valuable asset. With it, you can ensure your property is a good investment. But you can also establish a reasonable rent cost, understand the market you are coming into, and learn about your new property. Maximise your rental income – accurately assess property value.
