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Residential Rental Valuations – The Right Approach

Posted by: In: Real Estate 25 Apr 2014 Comments: 0 Tags: ,
Cap rate 1




Valuing residential rental properties can be tricky. Market value is not the same as investment value. When it comes to valuing residential rentals, you’re much better off taking the approach that commercial real estate investors use than the approach used by homeowners. Commercial investors base property values on the amount of annual income the property will produce. Homeowners value houses based on what others in the market are paying for similar houses.

To understand the value of investment property you need to understand how to calculate the “cap rate”. Not only does this give you a reliable way of understanding your return on investment, it also gives you an apple to apple method of determining the better rate of return between multiple investment options.


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