David Saks: IF You Raise the Rent Will It Increase the Value ?

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

IF You Raise the Rent Will It Increase the Value ?

                                          rent

The answer to the question is no, although I'd like to hear from our appraisers, and anyone else that wants to get in on the discussion.

Single family homes appear to fall under a different set of priorities as opposed to those properties that are purchased for the purpose of serving as income producing properties. Don't we buy single family homes for the appreciation ?

Raising the rent on a home won't increase the value of the home. That's the responsibility of the market changes, condition, the certified appraisal report and other situations. Supply and demand is another factor that changes the value. Location and desirability also work well into the process.

Speak with an appraiser today and see what influences the value of your property.

You can always increase your potential for value by purchasing property in areas where tenants want to live if your goal is for a healthy income from your investment.

The bottom line is that the best way to get value on the front end is to buy below market.

Does anyone disagree ?




David Saks



Time&Temp Memphis

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Comment balloon 12 commentsDavid Saks • June 14 2010 12:56PM

Comments

The short answer here is not necessarily the right one...and can't be answered easily...is the rent you are charging in line with similar properties in the area OR is the rent lower because you have long term tenants you prefer to "reward" with lower rent to keep themn there,..because they....pay their rent on time, maintain...and sometimes...not often...actually improve the property....

Posted by Sally K. & David L. Hanson, WI Realtors - Luxury - Divorce (EXP Realty 414-525-0563) over 11 years ago

I agree on getting the higher rent you must buy in or near an area in which people want to live, your other points as are Sally & David's are also right, but buying below market is also one of the best ways.  

Posted by Sheila Reeves (Allen Tate Realtors) over 11 years ago

Good to hear from you Sally, David. The income approach could create distinctions affecting the marketability of the property, that is as opposed to the sales comparison approach.

Since we're not dealing with anything representing replacement of any nature, the first two approaches to value might collide, although rent could be considered an arbitrary factor governed by motivating factors controlled by property management or the owner of the property in question.

I'd love to hear from some of our appraisers. Hope your having a fine week.

Posted by David Saks ((retired)) over 11 years ago

PS:  I love the little traveling web address on your site, any chance you would share that?

Posted by Sheila Reeves (Allen Tate Realtors) over 11 years ago

A magician never gives up his secrets, unless coerced by Mata Hari :-), Sheila. Thanks for the nice comment.

Posted by David Saks ((retired)) over 11 years ago

The answer is YES, if the property is being sold to an investor. If the property is being sold to an owner/occupant; having a long term lease could actually reduce the value. IF - the property is not under the consideration of being sold, the rental income has little if any impact on the value. There are MANY factors that will contribute to an increase in value- the rental income from a residential property is not one of them.

Now that I've said that..... How do you get that circle to spin around the blog?

Can you share the secret?

Thanks!

Mott Marvin Kornicki

Sunny Isles Beach, Florida

Posted by Aventura | Bal Harbour | Sunny Isles Beach | REALTOR® 786-229-7999 (SIB REALTY, Llc // WaterWayRealty.com) over 11 years ago

ps....right again, Sheila. Below market has it's advantages.

Posted by David Saks ((retired)) over 11 years ago

Great points, Mott. Investment strategy is all about a healthy return. The cursor is not for sale :-) I'm worried that 007 is going to come after me if I don't give it up before midnight.

Posted by David Saks ((retired)) over 11 years ago

There is a whole lot of SFR investments that ain't worth the price any more. I was amazed that SFR investment properties were bought with little or no consideration towards the ability to earn income.  Good post!

Posted by Rick Fitzgerald, The MultiFamily Expert (AAM Capital) over 11 years ago

Thanks, Rick. Nice comment about the income thing. Correction's going to take some time for the market. Hope your having a great week.

Posted by David Saks ((retired)) over 11 years ago

I would say if you used a gross rent multiplier and increase in rent would indicate an increase in value.

Posted by Richard Weeks, REALTOR®, Broker over 9 years ago

It sure would, Richard, if you have enough occupancy in a multi-family unit, for capitalization purposes. A single family dwelling wouldn't be able to deal with the same logic.

Posted by David Saks ((retired)) over 9 years ago

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