Profile picture for abadcodor

how to estimate value of real estate w/ rental price

  • November 12 2009 - US
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Answers (3)

Profile picture for Jon Petersen
if thats your valuation method, I have some property to sell you....
  • November 15 2009
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If a property generates income from rents or leases, the Income Method of Valuation is commonly used.

One Income Method of Real Estate Valuation:

1) Capitalization Rate:

[Annual Net Operating Income] divided by [Capitalization Rate] = Value

Example:

Net Operating Income = $1700/month; $20,400/year

Capitalization Rate: 5.0%  

$20,400/0.05 = $408,000 value.

 

 

  • November 12 2009
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If you're looking to value residential real estate then you DON'T use rental rates to estimate value.  Residential real estate is valued primarily by market comparables ("comps").  You can also cross reference that by using the cost per square foot compared to similar nearby properties.  You will be let down the wrong path if you focus on rental rates.  Please don't.

Call me if you'd like to discuss:  http://www.zillow.com/profile/Marco-Santarelli/

  • November 12 2009
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