The vacancy rate for Phoenix rental properties is slowly edging upward as new home construction gets back into full swing. This means investors can't guarantee that they'll find a tenant for their rental property as quickly as they'd like.
In times like these, it's vital to carry out a rental valuation to ensure you're not wasting your money. Keep reading to find out more about the importance of valuing a rental property using the latest calculation methods.
1. Helps You With Rent Pricing
When you know the value of the property, it's easier to identify the correct rental value.
It's common practice for landlords to set rent at 0.8% and 1.1% of the home's value. For example, if you value your rental home at $250,000, you can charge between $2,000 and $2,750 monthly.
Since property values increase over time, these calculations help you determine a fair rental increase every year, too.
2. Assists you in Choosing a Property
When you know how much rent to charge, it's easier to work out your profits. You can easily calculate what's left over when you deduct your monthly expenses from the gross rent.
There are always many facets involved in choosing a profitable investment property. Comparing the rent charged by other landlords in the neighborhood can help you figure out whether it's the right area for you to invest in.
3. To Calculate Property Taxes
Property taxes are a fixed cost based on the value of the property you own in Phoenix. A rental property valuation tool can help you anticipate these costs before you buy a property and ensure you pay the correct amount every year.
Fluctuating property valuations also mean you might be able to bring down the property tax value of your property if you check the latest market prices regularly.
4. Helps Streamline Mortgage Applications
Applying for an additional mortgage is one way to access large amounts of cash when necessary. When you decide to mortgage your property with a financial institution or bank, they may request a rental valuation and income statement.
This helps them determine the loan amount and streamlines the application process.
Common Rental Valuation Methods
Rental properties are unlike other properties in that they generate income for their owners. This means you can't simply hire an appraiser to determine the value of a home you're interested in.
The most effective rental valuation methods include:
The Capital Asset Pricing Model
This formula calculates the relationship between the risk you take in buying it and the investment's return. It's commonly used for buying stocks but works equally well for investment properties.
The Sales Comparison Approach
This is also known as an online rental analysis. It involves comparing the rental rates of similar properties in the neighborhood.
The Income Approach
These simple calculations help you figure out how much you'll make in a year from your property. It's expressed as a percentage of the property's purchase price.
Get Your Free Rental Valuation
PMI Phoenix Metro is backed by over 20 years of experience in real estate management and offers the full range of services for landlords wanting to streamline their property management strategies.
We employ the latest rental valuation methods and marketing tactics to ensure you find the best tenants for your Phoenix investment property. Talk to us today about maximizing your real estate rental property in Arizona.