If rent is $4200/month, what would you say the place is worth?

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Owen_IHB

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I know that there is a big difference between what a place SHOULD be worth if the rent is $4200 and what the place is actually selling for. From what I see, $4200 monthly rent gets you a place that is selling (or at listing) for about $1.3 million. I also see a house renting for $3500 per month that is listed at $1.145 million.





What do you think?





Also, do you folks see a big difference in the relationship between rent and home value for Irvine as opposed to one of the beach towns like Newport Beach or Laguna Beach. In other words, is it your sense that a $4200 rental in Irvine gets you a house worth more than $4200 in Laguna Beach?





Thanks in advance.
 
<p>Owen,</p>

<p>There is no direct relationship between price and rent.</p>

<p>Demand and supply dictate rent rate.</p>

<p>In Irvine, family with children needs certain amenities such as good schools and playground that Laguna Beach may lack; therefore, family may pay what it take to get into Irvine.</p>
 
Owen,





Rents determine the fundamental valuation of real estate. Read this: <a href="http://www.irvinehousingblog.com/2007/03/03/how-inflated-are-house-prices/">How Inflated are House Prices?</a> It will help you get a handle on just how far out of whack home prices are right now.
 
<p>"There is no direct relationship between price and rent."</p>

<p>Wow. I swear I just heard the collective gasp of just about every free market economist who has every lived. </p>

<p>If rents have no relationship to prices, why do nicer homes tend to both cost more and rent for more than poorer ones? Just a coincidence?</p>
 
This is just based on personal observation, in my area the ratio between rent to property value was roughly <strong><em>monthly rent x 250 = property value</em></strong>





However property prices is on the decline now, so you need to adjust the multiplier accordingly.





Are property prices inflated? Yes. Does rent always dictate fair market value on properties? No. Too many external factors from location to location.
 
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