When interest rates are low, it’s a good idea to look into refinancing your rental property to save money on your loan. However, as part of the refinancing process, lenders want an appraisal of the property to ensure that the value is in line with the amount they are loaning you. A rental property appraisal is a standard part of any refinancing process.
Rent Appraisals: Why They’re Necessary
Getting a property appraised is one of the most critical parts of the process because if the property doesn’t appraise for the value you hope, the lender won’t be able to complete the refinance. Because property values have encountered such significant swings over the past several years, you may be worried about the rental property appraisal and seeking advice on what you can do to improve your rental property’s appraisal, outside of significant remodeling and major overhauls of the structure and landscaping.
What Does an Appraiser Look For?
An appraiser is concerned with the structure and the property as a whole and so she is looking at things like the foundation, roof, home systems and the quality of the building materials. The appraiser is also looking to verify sizes of everything, from the lot size to the structure’s exterior. Size makes a difference in the overall value of the property and the appraiser is there to verify measurements are accurate. Generally, areas like basements and garages are not included in the gross living area but are included in the overall appraisal in a different way from non-living spaces.
The appraiser will also pay attention to any leaks, cracks, holes or other issues with the exterior. She will pay careful attention to how the property complies with building codes, noting any concerns on structural integrity and deterioration issues. Temporary structures on the property, like a shed or above ground swimming pools, are not part of the appraisal, unlike permanent structures such as sprinkler systems.
Rent Appraisers Don’t Care About Interior Design
On the inside, the appraiser is not concerned about how a home is decorated or whether there is too much clutter on the kitchen counter. Internal features of interest to the appraiser include the heating and air conditioning systems, fireplaces, smoke detectors, home security systems, windows, doors and other permanent aspects of the property.
The key thing to remember is that the appraiser is not concerned with any aspects of the rental property that is not a permanent part of the home or landscape. Of course, taking care of things like clutter and fresh paint can improve the appraiser’s overall impression of how well you are taking care of the property.
Along with the property’s condition, the appraiser will also take into account the value of similar properties in your neighborhood. Appraisers use county records, real estate listings, tax assessors and similar resources to provide the most accurate value of a property.
5 Ways To Improve Your Rent Appraisal
Here are 5 ways you can improve your rental property appraisal:
1. Provide copies of documents for past remodels and improvements
The appraiser deserves to know what you’ve done in the past to improve the property, so supplying her with documents that highlight those upgrades will help her see proof that you’ve put money into the property and the type of work that’s gone into it.
Documents could include a simple spreadsheet of costs with dates and the scope of work, or before and after photos or copies of the invoices or receipts from the contractors. Especially important are improvements to the structure, like HVAC systems, electrical systems or new insulation. These are much more important to an appraiser than cosmetic changes.
2. Make sure the property looks its best on the outside
Appraisers are human and can be influenced by the first impression of a property—known as curb appeal. The same curb appeal that can give prospective tenants a positive feeling about the place may also influence an appraiser.
Trimming trees, touch-ups with paint and a few flower pots brimming with blossoms can help turn a drab first impression into a better one. Eliminating yard clutter is important—so haul all the junk away, keep the weeds at bay and clean out the gutters of debris.
Other touches that boost curb appeal might include new house numbers, a welcome mat, a door wreath or even a new mailbox to replace a dented, dingy one.
3. Do basic maintenance inside
Look around the rental property and think like an appraiser. Is there anything that is obviously in need of a repair?
If there are things that need fixed, they should be taken care of before the appraisal. Focus on structural repairs rather than cosmetic. Ideas include gluing down the curling corner of a vinyl floor, making sure all smoke detectors have batteries, fixing the hinges of a cabinet door and replacing a broken window.
Focus less on the look of the rental property and more on demonstrating that the structure is well-maintained and sound.
4. Use design tips to make the interior look better
There are several design tips and tricks you can do just before the appraiser arrives that will make the property look bigger and more open. Some ideas include opening all the blinds and curtains to let natural light in and make rooms look bigger. While the focus is on the structure and quality of the rental property, the appraiser will make notes in her report about the general appearance and perception of maintenance of the property.
5. Create a pleasant experience for the appraiser
No, this doesn’t mean bribing the appraiser or sending them home with a few dozen homemade cookies. Instead, create a pleasant experience by being available to answer questions without following the appraiser every step of the way.
Make sure there is easy access to major appliances, like water heaters and air conditioning units. Work with your tenant to keep any pets and children out of the way so the appraiser can do her job. You don’t want to give the appraiser any reason to think negative thoughts during your rental property appraisal.
Working With Tenants
If your rental property is occupied, make sure you communicate with your tenant about how important it is for you to get a good appraisal. Besides providing the standard landlord notice that’s required for you and the appraiser to enter the occupied property, it makes sense to enlist the tenant’s help in creating a good impression by cleaning the rental unit before the appraisal and reducing clutter where possible.
Consider creating a short list of things the tenant could do to boost the appearance of the property and even provide an incentive if the tenant does them, such as a gas card or store gift certificate.
Whether your tenant is on board or not, a good appraiser will be able to look past any cosmetic issues and focus on the structure and the property itself, not the décor or the piles of laundry on the floor. With preparation and a long-term commitment to keeping the property in good shape, your appraisal will hopefully result in the right numbers to get the refinancing you need.
Why is my landlord getting an appraisal?
As mentioned earlier, the main reason a landlord is getting an appraisal on a rental property is to refinance in order to get a better interest rate on the loan. Another possible reason is the landlord is working to get a loan for another investment and is using the rental property as collateral on that loan.