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How does an higher renting income acts on the value of real estate?

Imagine an apartment building that was bought 2 years ago. Lets say since then the annual renting income of the building has passed from 16 800 to 22 700$. How would that affect the value of that building?

My guess would be that it would raise the value of the building by a little, but I honestly don't know if it's really linked.

Thanks

Update:

Thanks Milton, Well if this can be more significant. I live in a quarter of the building. All expenses included (taxes, mortgage, insurances and repairs(I do most of those by myself)) I used to have to pay 500$ a month. Now I can live there for under 50$ a month. If I would rent the part of the building in which I live I would have a net income of about 7500$ a year. But then I would have to find myself another place to live in...

3 Answers

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  • ?
    Lv 7
    1 decade ago
    Favorite Answer

    When someone purchases an income-producing property, the rental income is a factor but so are several other issues:

    Property taxes

    Repairs anticipated

    Type of clientele

    Location

    Availability of renters for that location.

    For instance, I own condo property in which all the units are rented 95% of the time at a rate that is lower than competing properties. The building is 87 years old which makes it a candidate for huge assessments if anything major goes wrong. For me, it has been a fair source of income (return of net 4% on purchase price which is not bad for nowadays) but a great source of tax deductions for depreciation. On the down side is that many of the investors in the property made the mistake of buying with a large mortgage so that their cash flow is badly negative and many gave up and abandoned their property which reduces the prices because banks tend to sell at greatly reduced prices. Short term, it is an investment that cannot be turned over. Fortunately, I bought for cash so I have liquidity and the ability to hold out until value increases back to where I purchased it.

    Your raw number is meaningless. What is your overhead compared to the income is more the issue?

    Here is a not really funny saying about owning income property. If you have a large fortune and invest it in property, you will end up with a small fortune.

  • 1 decade ago

    Just to expand on Milton's answer, I own several rental properties, check out this link I created to determine if your rental property will be profitable or not, that way you can decide what price you are comfortable with paying.

  • ketch
    Lv 4
    4 years ago

    creditors have not were given something to do with true belongings commissions. commonly, the vendor can pay the cost and that is desperate among the vendor and the Realtor. this is confusing to claim what ought to be too excessive because of the reality the fees selection via section and broking service.

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