Rental Information and Income Approach

Rental Information and Income Approach

Rental analysis on the new URAR has one big shift: unit to unit, not property to property. This is Module 12, in about four minutes. We'll cover the rent schedule, the rental grid, and how the gross rent multiplier turns market rent into value.

Two switches

Two appraiser inputs decide what shows up, and neither one prints on the report. Rent Schedule Developed by Appraiser turns on the Rental Information section. Then Include Unit in Rent Schedule picks which units, including ADUs, go in it. So a rent schedule can cover just what the assignment needs, like one single-family home's rent, or only the ADU. Income Approach Developed by Appraiser is its own switch. But an income approach always needs a rent schedule behind it.

Actual versus market

The Rent Schedule opens with a row per included unit: occupancy, monthly rent, lease terms, rent control, concessions, utilities, and furniture. If any unit is under rent control, describe it and its impact on value or marketability. Below that, two tables sit side by side: Actual Income, and your Opinion of Market Income. Each lists rent by unit, then other real property rental income, like storage. Pick a type, and both amounts are required. None means both are zero. The market rent subtotal, Total Monthly Market Rent, is the number the income approach will use.

Unit to unit

Now, the big change. Every subject unit gets its own rental grid, and every comparable is a unit, not necessarily a whole property. Two units in one building can be two separate comps. And one good comp can serve more than one subject unit, keeping the same comp number. Comparable Rental Properties lists each comp unit once, with its address, source, and actual rent.

Inside the rental grid

Five rows always display: Proximity to Subject, Bedrooms, Baths, Finished Area, and Vehicle Storage. Finished Area is the unit's total finished area, regardless of grade level. Rows like Floor Number or Furnished come in when relevant. Gray cells, dashes, and If Relevant rows work just like the sales grid. Add extra rows only for atypical features, with one data element per row.

Rate it against the unit

For some rows, you don't describe the comp. You rate it against the subject unit. Project Common Amenities and Services, Site Influence, View from Unit, Vehicle Storage, and Overall Comparison are each Superior, Similar, or Inferior. A comp used for two subject units can rate differently against each one. And there are no line adjustments. You weigh the differences and conclude one market-supported Adjusted Rent per comp.

From comps to market rent

The summary shows rent per finished area, actual rent, and adjusted rent. Then comes your Opinion of Market Rent for the subject unit, the same figure the rent schedule shows. Every comp gets a weight: Most, Less, or No Weight. Two strong comps and one supporting? Most, Most, and Less. Rental Analysis Commentary always displays. Use it to explain how you weighted the comps.

The GRM grid

The Income Approach is built on the gross rent multiplier. Its comps must be settled sales, not necessarily the ones in your sales grid. Listings can add support, but only in the commentary. Units Excluding ADUs always shows, an ADU row appears when any property has one, and Gross Building Finished Area or Rent Control come in when relevant. Then sale price, sale date, and gross monthly rent. An estimated rent shows with a tilde, and the commentary says why. Each comp's multiplier is sale price divided by monthly rent, and each gets a weight.

Rent times multiplier

At the bottom, Total Monthly Market Rent carries over from the rent schedule. You pick the Gross Rent Multiplier from your comps, and the indicated value is the product. Careful: the subject's Gross Monthly Rent is its actual rent, so it may not match the market rent. Income Approach Commentary explains your weights and your multiplier.

Five things to remember

Quick recap. One. Rent schedule first. The income approach is optional on top. Two. Actual and market income, side by side. Three. Unit to unit: one grid per subject unit, and every comp is a unit. Four. No line adjustments. Rate, weigh, and conclude an adjusted rent. Five. Market rent times the multiplier gives the indicated value. Next up: the Cost Approach.