Chattanooga has one of the top real estate industries in Tennessee with reasonable real estate prices and a thriving rental market.
35% of the city's 157,000 households are renter-occupied. For real estate investors, this is a great opportunity to own something that gives you immediate investment return with long-term potential as well.
One of the most important tasks before you purchase a rental property, however, is doing a rental valuation. In today's post, we'll explain how to perform a rental valuation on your Chattanooga property. Doing so will tell you the true value of your investment and help you determine a pricing model.
Keep reading and learn how to maximize your investment.
Market Research
The first step when looking at a rental investment is to perform market research. To understand how much your rental property will yield, you need to look at other similar properties in the same real estate market. When you start looking for your first tenants, you can bet that they'll be comparing rental prices as well.
Fortunately, there are many resources available that make it easy to research the competition. Look for rental units that have similar characteristics to the property you're interested in buying. The most important factors in the rental price are size, number of bedrooms, and the local area.
Try to compare your rental home to three to five properties of the same ilk. This will give you a strong indication of what you should be charging. Once you know this, your rental valuation is well on its way.
Investment Amenities
The other thing you need to think about when doing a rental valuation is the amenities in and around your property. When there are things that set your rental apart from the competition, they give you an advantage and allow you to charge more per month.
For example, in-unit laundry, new appliances, or outdoor space, are highly desirable for renters. You should also consider the local amenities. If your rental is located in an area with trendy restaurants, schools, or parks, you can factor this into your valuation.
Your Own Needs
Lastly, you must account for the cost of your investment. Unless you've paid for the entire home up-front, you're going to have monthly mortgage payments to deal with. It's important to charge enough rent to cover your costs and obtain profit without scaring away renters.
There are a few common rental valuation methods that investors use to deal with this. Many landlords will charge between 1-2% of the closing price of the home for monthly rent.
For a $300,000 home, this would be $3,000 per month, which is much higher than Chattanooga's average. To adjust for this, landlords would usually divide the property into multiple units. It might sound like a lot of work, but it's the best way to gain a quick investment return.
Get Help with Your Rental Valuation
These are some of the best rental valuation tactics on offer. That being said, it can still be a complicated task to strike a balance between appealing to renters and maximizing your rental income.
If you need help with your rental valuation, PMI Chattanooga can help. We're a full-service property manager offering a wide range of services that include property marketing, tenant screening, and rent collection. Contact us today to find out more.
