Good afternoon all, I am working on putting a deal together, but I’m having a hard time finding comps in the area. The average rental property goes for 650 to 900 a month. can I base the property value on the potential rental income? If so what %? I would guess 10%.
Thanks a MILLION!
yes, using a income approach is a very valid method for valuing investment prop. In fact, when I had an apprasial done to get rid of PMI on a duplex I own (actually 2 small houses on one lot), they had to do it that way since there was no comps in the area.
usually people refer to it as a gross rental multipler (i.e. value/gross rent per month). In general, it is rare to see below 100:1 and more typically is 120 to 180; however, in high end properties, resort areas, etc it can be 200-300 pretty easily. Therefore, you need to do a little bit of homework on your area. When I say 120, that means a house that will rent for $1000/mn is worth $120k
I am on an island that is a tourist town and the house is a few blocks from the beach and I fell strongly after doing some research the property would rent for 900, thus being the value being 108k using 900*120. Thanks