How to Value Real Estate Rentals for Profits
It was during the first half of 2000s that real estate investments gained a lot of popularity among Australians. This was because of the fact that lots of financing options were made available then with little requirements for down payment for houses. The great recession of 2007-2008, however, was a big blow to the real estate market just like the other economic areas. The strict standards of money lending by banks deeply affected the buying and selling properties in Australia. It’s as a result of this crisis that rental real estate was born apart from selling and buying of properties, and from then on it has been going nowhere but up even as the economy was restored. The bone of contention when it comes to Caloundra real estate rentals has been how to value to ensure profitability. Read on for some insights.
Sales Comparison Approach
This is one of the most popular approaches to dealing with valuing issues in real estate rentals. It involves making cross comparisons on properties that are similar and the value they rented over a certain time period. It often is reliant on attributes to derive a relative price value to a property. An example is when real estate rentals Sunshine Coast properties offer that are lying on a 6000 sqft are valued at 2 dollars per square foot, then an investor will value a property within the area at that same price. The approach has the advantage of allowing investors to assemble information on any emerging trends in real estate rentals.
Capital Asset Pricing Model
This approach explores the concept of risk and opportunity costs. It’s done by looking at the returns on the investment a rental income will likely bring in comparison to other investments that have minimal risk like real estate investment trusts. Therefore, if the potential return on investment from a Caloundra real estate rentals income is below expectations as regards the returns for guaranteed investment, then there will be no need to invest on that rental property in the first place.
This approach is quite popular with real estate agents Sunshine Coast has today. It utilizes the tactic of comparing the potential income to the investment made. This way you can be able to identify the annual capitalization rate for an investment. For a property costing 12000 dollars to buy, for example, the likely monthly income scenario will be a value around 1200 dollars with an annual capitalization rate of 12%.
In this approach, caloundra real estate rentals will be valued on the grounds of what the property will be utilized for. The land value and depreciated improvements value here, therefore, will be combined. In fact, it’s deemed the best approach for finding the value of a land that is vacant or of the structures that have not been utilized yet other than those that have been relatively used.
With proper valuing approaches, you can find real estate Sunny Coast rentals to be quite lucrative. Use the above approaches to arrive at a proper value. Also you can seek an experienced real estate agent’s help to give more insight.