When it comes to rental property, as with any asset, it is vital for the owner to determine its value before making any informed decisions. With the ever-changing state of the New Zealand property market, it is more important than ever to have up to date estimates of rental value. There are different ways of achieving this, from inspections by an expert valuer to various types of online tools, each of which have benefits and drawbacks depending on the situation. We're here to help you discern which is best for you and when it is particularly important to have a valuation. We've spoken to Hamish Bills of Lockwood Associates Property Valuers and Chairperson of the Wellington branch of the NZ Institute of Valuers to help get an expert insight into property valuation.
Hamish advises that “Annual rental assessments would be prudent, particularly in a buoyant market where the market is moving rapidly”. This is not to say that owners should, or will be able to immediately act on this information every time, but it is good practice to remain informed. Without an accurate valuation, owners risk charging either too much or too little rent. Charging too little will cause owners to lose out on potential income. Charging too much is likely to attract only short-term tenants or even deter all possible tenants, leaving the property vacant. It is a legal requirement to charge within the market rate, and if tenants believe they are being overcharged then they can apply for a tenancy tribunal to investigate.
There are a number of situations where an owner or investor may find a current market valuation useful or necessary. For example, they may wish to finance the purchase of another property by releasing equity, or if a property is going to be transferred to a trust. In cases where extensions or alterations are being planned, a valuation is also useful in order to avoid over-capitalisation.
There are now a variety of online tools available for use by owners, investors and the public. These range from completely free estimations to expensive, subscription-based services. The most obvious benefit of these tools is their convenience. They are quick and easy to use and provide a general estimate of market value and market rent. They are particularly useful where funds are limited, as some are free of charge. The tools usually work by collating data on the bonds lodged over a 6 month period throughout New Zealand. Many of the tools will compare a given property to others in the area (e.g. street or suburb) of a similar size (usually determined by the number of bedrooms). This method can provide a good overview, however they are mostly unable to account for the quality of interior decorations and fittings or views and precise locations. This can potentially result in certain properties being under or overvalued.
The most accurate way of valuing a property and its rental potential is by enlisting the help of a professional. They can perform an in-depth analysis and inspection of the property, and compare this information with the market in a subjective way that an algorithm simply cannot. By using this method, a property’s unique individual features can be better accounted for, so a more precise picture is given. Hamish says “Online tools are great to use as a baseline guide, but if more accuracy is required or there is a rental dispute between landlord and tenant then seek the advice of a professional, whether they be a registered valuer or residential property manager”.
Whatever your situation and needs, Quinovic can help. If you're interested in finding out what a rental property could be worth, why not try the free rental appraisal tool on our website? If you require a more in depth analysis, then we can assign an expert property manager to help.
To find out more about rental valuation, or for more general information, get in touch with us now.
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