Does rent affect valuation

Hi there

Just wondering if the valuer looks at the rental income of the property (compared to the median for the suburb) when calculating the value of the property?

Cheers
Dave

 

Only if it's a commercial property.

 

Commercial yes but generally no for residential.

Get some shockingly low rental figure by valuers at times though.

 

Most of the valuers who get sent through our managed properties ask me how much they rent for. I assume it does play a small part or they wouldn't ask.

 

If close to market rent then they will likely go with it.

 

Impact bank valuations - no not really.

Rental vals are part of valuation reports, lenders use this to validate rental income for purchases often. It usually doesn't make up a large part of the actual valuation of the place for standard resi properties.

Commercial asset values are underpinned by the yield they achieve (usually because its a higher proportion investor market who look at this to ascertain asset value) - hence make up a larger factor in these vals.

 

I am guessing in the event of commercial property that if your buying the property you are leasing (hence having control over rent) that the valuer will not consider the yield?

 

A valuer will always use yield in their commercial valuations unless it is such a purpose-built property that a market rent cannot be determined. Not all buyers of commercial property are leasing, the majority are investors as Accountants dislike lazy assets on the company's balance sheet.

 

In regular resi properties no, but the rent is relevant to the bank to deterine if you can afford to hang on to the property if they appeove your loan.

The rent can affect valuation in unusual resi properties that would only appeal to investors... such as blocks of units.

 

The rental potential is an important one if you're reliant on x amount to get over the line and the valuer doesn't agree. I've seen valuations which have caused significant issues in the finance process where the valuer has noted a significantly lower rent than what the property is/can achieve - which the lender will in many cases override and accept as the lower figure.

This is also the case with construction loans - a rental estimate on these can be substantial below the actual rental potential if the property is not turn key - ie all landscaping, fixtures, flooring, window furnishings noted. Without this the valuer could have discretion to discount the rent by any amount (say 50%), or even say it cannot be rented out in it's current state and note a zero rental figure which can stop all but the highest borrowing capacity scenarios.