Rental Valuation: Determining Property Value in Los Angeles, CA

Rental Valuation: Determining Property Value in Los Angeles, CA

Forty-four percent of California homes are renter occupied -- a much higher rate than the rest of the country.

If you're looking to make a real estate investment in LA, you need to make sure that it's going to provide you with enough monthly rental income. To do so, you need to perform a rental valuation to determine the estimated value of the property as a rental.

Below, we'll explain the different tactics involved in a rental valuation so you can get a clear picture of how valuable your property will be as a rental. Keep reading and learn more about the valuation process.

Perform Market Research

Start every rental valuation by performing market research. The local housing market is what can most strongly dictate how much you can charge for monthly rent and thus how valuable the property will be.

Go online and take a look at what other similar homes in similar neighborhoods are being rented for. Take care to choose homes that have similar square footage, the same number of bedrooms, and similar amenities.

You need to do this because this is exactly what prospective tenants are going to do before applying to live in your rental. Charging significantly more than other rentals of similar quality is going to result in long rental vacancies. This is how you lose money as a landlord.

Home and Local Amenities

The next thing to think about is the state of the home, as well as the area it's in. Firstly, what sets this home apart from others like it? Take a look at the particular amenities it has that other homes don't, such as a finished basement, yard space, or new appliances.

Neighborhood matters too. Areas that have access to parks, schools, restaurants, and other attractions are going to attract tenants more easily. As a landlord, you can charge more per month for these luxuries.

Building Owner Equity

A huge concern for any property investor is building owner equity. You need to make sure you'll be able to charge enough for rent to cover your expenses and eventually make plenty of monthly rental income.

There are multiple common methods that investors use to get an idea of how much rent they need to charge to make money. One is to charge around 1% of the total value of the home per month.

In Los Angeles, the average single-family home goes for around $970,000, so 1% of that is $9,700 per month -- not exactly affordable when compared to the average rent price of $2,800 per month.

This is one of the reasons investors will convert a home into multiple units. By turning one home into 3 units, you can cover your mortgage payments and start making money sooner.

Hire Property Management to Help

Doing a rental valuation is the best way to determine whether or not an investment property is worth your time and money. You should try to do them before you invest, but if you already have the property, you'll need to do it to determine an appropriate rental price.

It can be a lot of work, which is why many investors hire property management to help. At PMI LA Pacific, we can give you an accurate rental valuation, in addition to a wide range of other helpful services. Contact us today to learn more.