Insider Guide to Rental Property Valuation

In this rental property valuation guide, we look at how to value rental property and also check out a few other aspects of property due diligence.

As with researching a property's sales valuation, the most accurate representation of a property's rental value is given by comparables, or comps. Comps are prices that similar properties -- that is similar spec, location and condition -- have rented for recently.

The main things you need to know are how much the property will rent for and what the demand will be... i.e. how long will it take to let?

Lettings portals... A better yardstick?

Although letting websites won't tell you what properties actually let for, they tend to be a rather more accurate yardstick for rental values than for sales values.

You sometimes find that properties listed privately by the landlord can be overvalued. But by the same token, agent properties can also be overvalued when first listed (this is a tactic used by some unscrupulous agents to get business).

Rightmove is a good source of rental values nationwide and their "Price Comparison Report" gives you an instant collection of rental comparables for the local area. Citylets and Lettingweb are popular in Scotland. Citylets is also big in Northern Ireland.

Where you can't find an exact comparable, you need to extrapolate from the nearest one available. Your skill in doing this will improve with practice.

Letting agents... Easier to talk to than estate agents?

Calling a local agent is a fantastic way to confirm a rental property valuation. They will be more than happy to talk to you if they think they'll have a shot at letting the property for you. And they're less likely to give you duff info as they don't want to be wasting their time on unlettable properties!

Other rental property valuation resources

An awesome tool for gauging lettability is the Citylets quarterly rental report. It gives time to let stats and average rent achieved figures for different sizes of property by postcode areas of major cities. Unfortunately this currently only covers Scotland and Northern Ireland.

One of the rental property valuation tools available to letting agents is the historical rent data gathered by lettings portals like Citylets and Lettingweb. Unfortunately this info is only available if you sign up as an agent.

But if it's any consolation, I don't find no longer having access to these much of a handicap... I can get along just fine with the public resources.

Other aspects of property due diligence

Property due diligence refers to the property investment research that you should carry out before you make the decision to invest.

Property valuation is a big part of due diligence... but here are a few additional factors that you should consider.

• Is the property urban or rural?While there will always be exceptions, in general, urban properties will be easier to sell and have higher rental demand. With the opposite being true of rural properties.
• What is the area like?What are the crime levels? A good source of info on this front is UpMyStreet.com. A great way to get a feel for an area is to visit it both in the daytime and at night. Update -- UpMyStreet.com was bought by Zoopla in May 2012 and the crime info seems to have disappeared! If any readers find an alternative please leave a comment below.
• Who are the main employers in the area?Do their employees suit the target demographic of the property you are trying to sell/let?
• Is there a dump behind the property?Google earth and street view can give you a good first impression of this but note that street view is now a few years out of date so there's no substitute for a visit in person.
• What municipal building works are planned in the area?A new airport? Then you might be about to make a bad investment! A new 'A' road providing commuter links to a nearby city? Then you might be onto a winner (unless the road goes through your front garden!).

Systemise your DD

Using a standard form to systemise your property due diligence process can help reduce the chance of making costly mistakes. You can download the one that we use in our business by filling in the form below.

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