How To Perform a Rental Valuation in College Station, TX

How To Perform a Rental Valuation in College Station, TX

In College Station, Texas, real estate professionals are optimistic about the housing market. 2024 is likely to be a year of lower interest rates and higher demand.

You can take our word for it, or you can conduct a rental valuation. A rental valuation is a great way to learn about your potential return on investment.

There are different methods used to evaluate a rental property. You can assess the future profitability of a property using any of these approaches.

Sales Comparison

Real estate brokers and appraisers use a sales comparison approach to estimate property value. This rental valuation technique compares similar properties sold during the same period.

A sales comparison provides an idea of the property's value but can be a broad method. It can only help you see how your property compares to similar ones.

Comparing two properties with similar square footage but with many different characteristics won't be helpful. A professional property management company can help you find properties similar to yours for sales comparison.

Income Approach

Positive cash flow is the goal of being a property investor. Along with other rental valuation techniques, it makes sense to consider current and prospective income with this approach.

The income approach is often applied to commercial real estate. You will get the property's net operating income by deducting costs from the rental income.

Total rental income refers to the standard monthly rent and additional income, such as:

  • Water income
  • Pet rent
  • Private parking income

Operating expenditures can include regular charges like property management fees, upkeep, taxes, and more.

Gross Rent Multiplier Approach

Rental property value is determined by the gross rent multiplier approach. It involves comparing the income to the price of the property. It's a helpful tool for market appreciation and fluctuations.

This approach is straightforward as you only need the gross rent and real estate rental property price. You will divide the price of the real estate by the gross annual rental income.

Keeping accurate rental property accounting records can help you identify these numbers.

Capital Asset Pricing Model

The capital asset pricing model (CAPM) is a comprehensive valuation method. Opportunity, cost, and risk are all components covered in this valuation method. If you want to build equity over time, this method is helpful.

This model examines how much of a return you can generate. It compares with other risk-free investments like treasury bonds and real estate investment trusts (REITs).

Taking on the risk of an investment property doesn't make sense if the projected return exceeds the possible ROI.

Determine Property Worth With a Rental Valuation

Determining property worth can help you identify a good investment opportunity.

There are various ways to complete a rental valuation. Use the sales comparison, income approach, gross rent multiplier approach, or capital asset pricing model.

With the help of a property management company in College Station, Texas, you can make data-driven decisions. Blue Ribbon Property Management combines modern innovations and work ethic to provide top services.

Our goal is to improve the lives of real estate investors and residents. Contact us today to benefit from decades of experience.