Rental Value Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Rental Value, written in plain English, along with examples of how it is used.

What is Rental Value?

(v) Rental value is defined as the amount the property is eligible to get had it been rented out as per the prevailing situations existing in that place for similar property.

History and Meaning of Rental Value

Rental value is a term used in real estate appraisal and valuation. It refers to the amount of rental income a property could generate if it were to be rented out at the prevailing market rental rates. This value is used to determine the potential income stream of a property, both for current owners and potential investors.

Examples of Rental Value

  1. A commercial property owner wants to determine the rental value of their space. They hire an appraiser to estimate what the property could rent for based on similar properties in the area, and the appraiser determines a rental value of $20 per square foot.
  2. A landlord is considering raising the rent on their rental property. They research the rental rates for similar properties in the area and determine that their property is currently renting below market value. They increase the rent to align with the prevailing rental rates and the rental value of the property.
  3. A property owner is considering converting their property into a rental property. They research the rental rates for similar properties in the area to estimate the potential rental value of their property.

Legal Terms Similar to Rental Value

  1. Fair Market Value - Refers to the price that an asset would sell for on the open market.
  2. Capitalization Rate - A formula used to estimate the current value of an income-producing property based on its potential future income.
  3. Gross Rent Multiplier - A formula used to estimate a property's value based on its rental income potential.