Selecting the right rent for your property is a balancing act. You want to make money from your investment but must also be fair to your tenants. If your rent is too expensive, tenants might leave; if it’s too low, you might not have enough ROI.
But finding the balance has become even more challenging in recent years. Due to the rapid changes in the West Australian housing industry, landlords and property investors find it challenging to adapt to shifting market conditions and optimise returns on investment.
Whether you are a first-time investor or have a portfolio of properties, here is why professional rental appraisals are crucial for property owners.
What is a Rental Appraisal?
A rental appraisal is a process in which an expert analyses your property, market, and location to determine how much you should charge. They offer a report derived from their assessment to assist in making decisions about renting out your property.
If you are already renting your property, the expert can check your current situation and suggest any changes for when the lease is due to be renewed. It is recommended that you check your property to ensure your rent aligns with what is happening in the market.
How to Choose a Qualified Rental Appraiser?
Choosing the right appraiser for your property is important to get accurate information. Some key factors to consider are:
1. Licensing and Certification
Ensure the appraiser has a valid license and certification from the state. This will ensure they know what they are doing and adhere to professional standards.
2. Experience in Rental Appraisals
Pick an appraiser with extensive experience conducting rental appraisals. An experienced appraiser should know about the local rental market and what affects rental prices.
3. Local Knowledge
The appraiser should know the neighbourhood and area of the rental property. This information is important due to the diverse property market across states and cities, like in Australia. It helps them compare your property and give you an accurate, fair price.
4. Unbiased Professional Advice
Select someone honest and fair with the property’s rental value. They should let personal or external factors affect their assessment.
5. Attention to Detail
A qualified appraiser should thoroughly inspect the property, including its size, location, condition, and special features.
6. Good Communication
The appraiser should be able to explain clearly how they decided on your property’s value. They should be able to address your concerns or questions you may have.
How to Prepare for the Appraisal?
Selecting a good appraiser is the first step. It is important to prepare your rental property to get an accurate valuation. Follow these steps:
Step 1: Increase Curb Appeal
A clean exterior helps create a positive impression. Ensure your lawn is mowed, edges are trimmed, and the bushes are neat. Fix any small problems you see with the property. Add welcoming touches to the front door, like flower pots or a new doormat.
Step 2: Declutter and Clean
Pack away unnecessary items and do a deep clean. A clean home is better than a messy one. Remove personal items and furniture so that the space looks bigger. This will help the appraiser picture your property as a rental more easily.
Step 3: Gather Important Documentation
Gather all the recent improvements or renovations made to your property. Give the appraiser property specifications, such as floor plans and square footage details.
Step 4: Compare the Local Rental Market
Check the rental listings in your area. This would help you understand the current rental prices and trends and give you realistic expectations about your property’s value.
Step 5: Work With the Appraiser
Be there when the appraiser visits your property. That way, you can answer if they have any questions that might affect the rental’s value.
Conducting the Rental Appraisal
You can conduct a rental appraisal yourself or hire a professional appraiser. Here’s how:
Do-It-Yourself Rental Appraisal
If you are doing it yourself, list what your property offers. Put the number of bedrooms and bathrooms and their size. Write down the special features of your property, and make sure you indicate if it is in good shape or doesn’t work.
Do market research for similar properties for rent in your area. Check how much they charge and what they offer. In addition, other expenses like taxes and insurance should be considered. You can include utilities if you pay that, too.
After looking at that information, you can decide on a fair price range for your property.
Hire a Professional Rental Appraiser
You can contact a real estate agent or property manager to learn about the local rental market and how they can help you.
The expert will visit and assess your property. They will check its condition and ask about your renting goals. You’ll get a report that includes:
- A suggested price range.
- Information about similar properties.
- What’s happening in the local rental market?
- Ideas to make your property more appealing to renters.
Factors Influencing Rental Appraisals
If you’re planning to rent out your property, there are factors you should take note of so that you’ll know how much you can charge:
Location
Where your property is located is very important. A good neighbourhood can help you charge more rent. Before buying a property, look into the area. Think about what potential renters might want in a location. Is it close to shops, schools, or public transport? These things can make your property more valuable.
Property Size and Features
How big your property is and what it offers can affect its value. Usually, bigger properties can charge more rent. But it’s important to know what renters in your area want. Some features that can make your property more valuable include:
- A modern kitchen.
- New appliances.
- A backyard or parking space.
If you improve your property with things renters like, you can charge more rent. Compare your property to others nearby to set a fair price.
Market Conditions
The real estate market changes all the time. This can affect how much rent you can charge. You can ask for more money when there aren’t many places to rent. But if many rentals are available, you might need to lower your price to attract tenants. Keep an eye on what’s happening in the market and be ready to change your rent if needed.
Property Maintenance and Presentation
A well-kept property can attract good tenants willing to pay more, potentially improving your rental yield. Regular maintenance, upgrades, and repairs help keep your property in good condition. This can increase its value.
How your property looks is also important. Ensure it looks good in online listings and when people view it. A clean, tidy, and welcoming property can help you charge more rent.
Local Rules and Rent Control
It’s important to know about local rules that affect how much rent you can charge. Some areas have rent control laws to stop landlords from raising rents too much. Make sure you understand these rules to avoid problems.
Also, consider property taxes and any fees you might have to pay as a landlord. These can affect how much money you make from your property.
Legal and Regulatory Considerations
When you set your rent based on the appraisal report, you must follow the rental laws in your area. These laws can be different depending on the location of the rental property. Some important things to remember:
- There may be rules about how often you can raise the rent. For example, in Queensland, you can only increase rent once a year.
- Some places don’t allow rent bidding, so you can only ask tenants to offer the advertised price.
- Your property might need to meet minimum standards, which can affect the rent you can charge.
After you decide on the rent, let’s include information from the appraisal in your tenancy agreement. This helps both you and your tenant understand how the rent was set. You should include:
- The rent range is suggested in the appraisal report.
- The final rent you and the tenant agreed on.
- When was the appraisal done, and who did it?
Summing up
Your rental valuation will be affected by many factors, including the property’s condition, the local housing market, and even broader economic factors like interest rates. Understanding these elements is helpful for anyone involved in renting properties.
It allows landlords, tenants, and real estate professionals to make smarter choices about rental prices. By looking at all these factors together, people can get a clearer picture of a fair rent for a particular property.
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