How to Estimate the Current Value of your Property
Perhaps you are considering selling your property, but want to do so at the right time to get the best price. Even if you decide that you are not ready to sell now, it’s good to do an annual check to see how the property values of your rental property are responding to market and population changes (or lack thereof) in comparison to real estate price changes in surrounding areas.
Today, you can check available housing and prices around the country via the internet on sites such as Zillow.com, Craigslist.org, and Realtor.com, to name a few. Compare the recent sale prices of places of similar size, condition, and location to get a rough estimate of:
o what your property might be worth currently, and
o how the prices in your immediate area compare to neighboring areas.
Once you have collected the sale price and annual gross incomes on similar properties sold in your surrounding area, an individual Gross Rent Multiplier (GRM) can be determined for each of the properties sold by dividing the properties’ final sales price by their annual gross rental income. Your GRM would then be projected as the average of the individual GRMs that you calculated on the sold properties. Using the average GRM and your current annual gross rental income information, you can then calculate a current projected sales price for your property.
Local Trends impacting Property Values
Trends specific to your area will impact your property value. Such trends are created by outside forces, such as:
- Social trends such as increasing or decreasing crime rates, population shifts, local school ratings, access to mass transportation, and housing construction, to name a few;
- Govermental forces such as rent control ordinances, increases in property, income and/or sales tax rates, and the overall efficiency and effectiveness of public-run organizations such as Fire Department, Police Department, and the school systems;
- Environmental trends – local landscape, climate, and related dangers specific to the area (e.g., a risk of wildfire on property in the mountains, versus flood potential on property located in low-lying areas).
Since trends can vary greatly depending on locale, it’s important that you focus on the sale prices of similar rental property in the surrounding area when determining your rental property’s current market value.