Investing in real estate is a risk like any other. You spend a lot of money on a property in the hopes that it'll generate passive income exceeding its original cost. However, that all depends on whether it was worth the investment in the first place.
Rental valuation is how you determine the economic worth of any property. Ideally, the potential cash flow will be higher than the initial value. That includes the cost of upkeep and maintenance.
Here's how to calculate rental valuation in Hawaii and why it matters.
What is Rental Valuation?
A rental assessment is how you find out the fair market value of a property that you intend to rent out in a lease. It's how you find out how much you can charge someone per month and still hope to make a profit.
In order to calculate this value, you have to take into account different considerations such as the operating and maintenance costs. Two ways to calculate property value are with the gross income multiplier and discounting future net operating income (NOI).
The gross income multiplier divides the property price by the gross rental income to get a fair market value. Alternatively, you can calculate the number using the NOI rate of growth and the capitalization rate.
After that, you need to scale it to match the prices of your competition.
Why Rental Valuation in Hawaii Matters
Hawaii rental valuation is important for investors, especially if they aren't familiar with the local real estate market. It can help you determine whether you can actually make money off of your investment.
Although Hawaii is one of the most expensive states to live in, it also has low poverty rates. The local housing market is booming, and the median sales price is $717,200. Rental valuation can help you find the best investment option.
How to Improve Rental Valuations
A rental valuation isn't a fixed number, so you don't need to get scared if a property you're interested in has a low value. There are some ways to improve its value with some simple renovations.
First, you can give the kitchen some attention. Sand and repaint the existing cabinets to add a new look. Replace any old, rusty faucets or dirty countertops.
Remodel the bathroom by adding shelves or adding a shower. Even redoing the floor and slapping a fresh coat of paint on the walls can make a big difference.
Finally, you can add in some amenities like a dishwasher or a fenced-in yard. It'll also make your property more appealing to new renters.
Hawaii Property Management
Conducting a rental valuation is only the first step if you're planning to invest in real estate. You still need to gather up the funds, make the purchase, and figure out how you're going to manage it. That's when you look for companies offering property management in Hawaii.
HomeRiver Group Kona offers property management services for both investors and residents. Check out our website to see available properties in Hawaii and other areas you're interested in. Contact us if you have any questions.