How do you calculate the rental value of your property?
Do you intend to rent out your home to supplement your income? Renting not only necessitates the required repairs and upgrades to make the home appealing to tenants, but it also assists you in determining an appropriate rental value based on market sentiment. Knowing how to estimate the property’s rental value can help you as a landlord set the optimum price and close a good deal.
According to Gunjan Goel, Director of Goel Ganga Developments, although a higher rental rate may deter potential tenants, a lower rental value may cause financial losses for the landlord. As a result, knowing the exact rental potential of the property is essential so that you not only place your home on the market but also attract the best possible returns.
Aspects to consider when evaluating a property’s rental value Rental rate
The annual rental return on a residential property ranges between 2.5 and 3.5 percent of the property’s market value. Consequently, the most frequently asked question is how to compute rent based on rental yield! For example, if your property’s market worth is Rs 30 lakh, the monthly rental value will fluctuate from Rs 6,250 to Rs 8,750.
This is how to figure out a property’s rental value:
In the case of a rental yield of 2.5 percent
30 lakh * 2.5 = Rs 75,000 per year
As a result, the monthly rent will be Rs 75,000/12= Rs 6,250.
In the event of a rental yield of 3.5 percent,
(Rs 30 lakh*3.5)/100 is Rs 1,05,000 per year
As a result, the monthly rental will be Rs 1,05,000/12= Rs 8,750.
Nevertheless, due to demand and supply imbalances, the valuation may change in some circumstances. Assume the property is in a high-demand category with limited availability, or if any other favourable unseen force comes into play. In that instance, the rental rate can be as high as 3.5 percent of the property’s value, but it should not be higher. In contrast, if there is little demand, the rental rate should be set at 2.5% of the property’s worth.
Property value in the market
Market value is the property’s current worth in relation to factors involved. Many variables, such as infrastructure development, may have an influence on the market value of your home. For example, each new flyover, park, or metro link has the opportunity to boost the property’s worth and assist you charge a better rental rate. Furthermore, the existing market value may fall as a result of things such as dramatically increased in recent, halted infrastructure developments, or a decrease in circle rates. As a result, knowing the current market value of the property is critical. If you are unable to estimate a property worth, engage a property assessor to determine the precise cost of the property.
Current rental rate
According to experts, it is also essential to evaluate the fees paid by other landlords in your region. Check if the rental rate paid is comparable to the rental rate of other similar residences in the area. A significant difference between the typical rental value in the region and your rental ‘ask’ may dissuade tenants and direct them to other possibilities with cheaper rates. Considering the monthly mortgage payment as well as additional repair and tax charges that must be paid while the property is idle before deciding on a rental rate.
Factors that might increase your property’s rental value.
Added expenses needed to make the home appropriate for leasing out, such as furniture and fittings, also play a vital part in calculating rental revenue. Furthermore, extra amenities such as parking, a swimming pool, and a clubhouse might generate a higher fee.
Amenities have a substantial influence on a property’s rental value. A house with wall cabinets, fans, kitchen equipment, an added balcony, or storage space would invariably attract a somewhat more rent than a comparable market value property in the same micro-market.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
