How do I compute a rental value?

R

RobAMerc

Registered User
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Hi all,

I am wondering if you could help me out.
I am trying to calculate a rental value on some storage I have.

I have an unused "apartment" over a shop I let.
I estimate it would cost 50-70k to renovate it to a liveable condition.

The guy in the shop wishes to rent it as storage. So how much do I charge him ?

If I rent it as storage, I dont have to invest anything and I dont have the issue of a new tenant.
If I do invest, I get the property with an average rent of about 700 p/m

So, what could I charge that reflects the fact I am going to potentially loose 700pm rent, but also that I dont have to invest 50k into it ?

Hope this makes sense!
 
I don't think the amount you charge for rental storage is determined by your opportunity cost ie the rent you might get but rather by the cost of alternatives to renting it for storage.

The guy in the shop could rent storage from other sources but he would have to factor in the extra cost of the distance involved. Why don't you check the cost of storage for a similar storage area in a close by lockup storage facility and then add on an amount for the benefit of having it close to hand?
 
I would also assess how keen you are to keep your tenant in the shop and whether this decision could increase or decrease the chances of him moving elsewhere.

Presumably the apartment has been empty for a considerable time. Anything more than nominal rent may not go down well for a space that is currently not used for anything else.
 
thanks - the reality is I was considering doing the renovation and was discussing it with him when he asked could he take it as storage.
I dont think there is an issue around him leaving because of it ( he still has a long lease too )
I then need to figure out what I need to get monthly to make it worth my while renting it as storage vs renovating the living space and renting 2 properties.
Its then up to me to decide if the rent I can achieve vs what it needs to achieve so I am not at a loss is a figure I am happy with.
 
Leo said:
Why use the quotes? Does this unit have the appropriate planning permission? Would the investment bring it up to the minimum standards required?
Click to expand...
Presumably as it's currently uninhabitable, and as such merely a former and potential future apartment?
RobAMerc said:
.... some storage I have.

I have an unused "apartment" over a shop I let.
I estimate it would cost 50-70k to renovate it to a liveable condition.
Click to expand...
 
RobAMerc said:
Its already an apartment - I have been quoted 50k to bring it up to spec.
Click to expand...

Then use it as an apartment, letting it as commercial storage would require a change of use and could cause you further problems down the line.
 
thanks for the insight, in actual fact he would just be taking a lease on the whole building as opposed to the shop on the ground floor. What we decides to do with it is his business.
 
Planning issues aside.

After the investment, you suggest it'd be worth about 700 per month rent. Which suggests a value of about 120 - 140k, depending on where it is.
So in current state it's worth at most 70 - 90k?

Based on that, if you can get close to 400 as it is, you'd be doing well to just keep it as storage. Deduct more for not having to deal with extra tenants.

Secure lockup storage units in regional towns are about 175 per month for 60 sq feet. It's not much more to rent a shipping container. Again, depends on where it's located.
 
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