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How to get a rental appraisal

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how to get a rental appraisal
rental appraisal
Tim Ash
Tim Ash
May 23, 2020
minute read

Why getting an accurate rental estimate is key to a successful investment property

Rental appraisals are used for a variety of reasons such as loan applications , refinancing, assessing feasibility and generally giving landlords an estimate on what their property will return so they can plan accordingly. 

For a loan

When you are trying to get a loan approved for an investment property purchase your broker or bank manager will request that a rental appraisal is done on the property and a rental appraisal letter is provided as part of your loan application that they submit to their lender/bank.

If the rental appraisal that is provided to the bank is too low then it may very well stop you from getting the loan approved, therefore the rental appraisal that you require must be backed by evidence on how the real estate agent arrived at that figure. 

There is nothing to say that the rental appraisal that is provided to the bank can't be optimistic however it does need to be somewhat realistic as to the potential return ie: For a one bedroom apartment if the average rent in the area is $300 per week and your rental appraisal letter reads $500 per week it would be hard to justify to the banks as to how your particular property would achieve an extra $200 per week. However if we were to put forward $330 per week to $350 per week rent, that would be an optimistic and realistic market value on the basis that your one bedroom apartments may have a city view or a larger balcony for example.

In addition to every rental appraisal letter that our agency does we also provide the client with a Rental Comparative Market Analysis report in order to give our clients as much evidence as possible as to the reason we arrived at the rental market value. 

Click here to view an example of the Rental Comparative Market Analysis Report.

Sample Rental CMA Report
Sample Rental CMA Report

You will also be able to forward the rental CMA report to your broker slash bank manager In addition to the rental appraisal letter which will give them more confidence in the figures provided. 

Renting out your property

If you are looking at renting out the property that you are currently living in, an accurate rental appraisal letter will assist you in determining the rental yield of the property and whether the monthly rent after the agents fees will be enough to cover the mortgage. This is the reason why accurate rental appraisals are critical because if you are provided with an appraisal that is well above market value then you could find yourself without a tenant for quite a long time which could very quickly blow your budget. This is why evidence of the Rental Comparative Market Analysis report is crucial as you will understand how the real estate agent arrived at the rental appraisal price range.  

Drawing additional equity

If you are looking at drawing equity out of your investment property that's currently vacant and not receiving any rental income a rental appraisal letter is going to be of significant importance for you to be able to draw out the equity that you would like. When you go through the process of drawing equity out of your property the loan broker/bank manager will have to get a valuation done in order to see just how much equity you can draw out. The banks will always look toward how you will be able to service the debt particularly when drawing the equity out of your investment property. Therefore an accurate rental appraisal will be a big part on whether your equity loan will be approved.

Our Rental Appraisal Process

 At TTS Real Estate we can provide you with a formal rental appraisal letter and rental comparative market analysis report that will be acceptable by the banks/brokers at no charge.

The report will contain properties that have leased out within one kilometre of your property that have the same bedrooms, bathrooms, car spaces and are of the same type of property as well. 

For example, if your property is a 2 bedroom apartment then the report will contain comparable 2 bedroom apartments that have been leased out over the past 6 months within 1km of your property.

Thank you for taking the time to read this article please feel free to get in contact with the property address you require a rental appraisal for and we will provide this report to you within 24 hours of your request.

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