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The Rental Valuation Process Explained: How to Determine Accurate Rent Prices

The Rental Valuation Process Explained: How to Determine Accurate Rent Prices

The Bay Area is home to some of the highest rent prices in the country.

San Mateo's average rent price is over $3,300, just above San Francisco's average. If you can afford it, investing in a rental property here is a no-brainer. However, it's important to do some research before you spend big money on an investment property.

The rental valuation process is the most important aspect of this research. In today's post, we'll explain how to determine fair rent prices for your San Mateo property investment. It's a fine line between getting the most out of your rental and scaring renters away, so keep reading and we'll clear it up.

What Is a Rental Valuation?

A rental valuation determines the value of your rental property while tenants reside in it. It's important to do this before you purchase an investment property because it'll tell you whether or not it's worth your time and money.

There are various methods to determine a rental property's value, all of which require you to know how much rental income you'll receive each month. To determine your rent prices, you need to look at several factors.

Market Research

The first thing is to look at other similar properties in the same area, but it shouldn't be the only method you use for setting rent prices.

There are always unknowns with looking at your neighborhood rent prices. Every home has its own set of perks and pitfalls, like lot size, age, recent remodels, and amenities. If you find another home very comparable to yours, it'll give you a great starting point.

Neighborhood Amenities

Any investor will tell you that location is one of the most important factors in real estate - it's no different for renters. People will pay a premium for the perfect location, so take a look at your neighborhood amenities. If there are grocery stores, shops, restaurants, and parks nearby, you can charge more.

Home Value

It's important to factor how much you paid for the home into the rental price. Most experts say you should charge between 0.8-1.1% of your home's value for rent.

The median home value in San Mateo is $1.3 million, which puts rent at an unreasonable $10,400 per month. This is why many investors will put work into converting single-family homes into multiple housing units to make up the cost.

Size and Amenities

If you invest in a large home with multiple bedrooms, you can charge more. Being able to split a multi-floor property into 2-3 rental units multiplies your rental income, allowing you to get closer to that $10,400 mark.

Even when you rent the home as a single rental unit, size matters. Each additional bedroom can add $1,000 or more to the rental price. Square footage, backyard space, and in-house amenities will allow you to ask for even more.

Getting Help With Your Rental Valuation

Setting a monthly rent price for your investment property can be tricky. If you ask for too much, you'll alienate a large portion of the tenant pool, but setting rent too low makes it hard to make money with your investment.

It can be helpful to get expert help with a rental valuation. Five Star Property Management is one of the top property managers in the Bay Area. Contact us today to get a free rental price analysis.

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