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Determining Property Values

Real Estate Agent with Realnet Tampa Bay

Once you’ve found the ideal investment property and approved its validity for your investment goals, you need to evaluate the property’s worth. Be sure to do your own research. You can easily lose everything you’ve worked hard for if you determine the value purely by the word of the seller or the county tax office.

The following assessment methods will enable you to get a better idea of the actual value of the property prior to your purchase.


The Comparable Sales Method

The comparable sales method is the most popular for determining the value of single family homes and buildings with less than 5 rental units. Go to the local county courthouse and research how much similar houses in the same area have sold for recently. There are also many realtors that will offer their assistance, and you can do some research online as well. Be sure to account for any difference in amenities between the properties. A great way to do this is to merely divide the sales price by the square footage of living space.


The Replacement Cost Method

A less common method of determining property value is to estimate what it would cost to build the exact same property from scratch. Remember to include costs for materials, labor and property depreciation for the most accurate assessment. The easiest way to get accurate figures is to call a local contractor and ask how much they would charge per square foot to build a home in the area of your subject property.


Income Valuation Method

Last but not least, we have the income valuation method of determining a property’s value. This style is better suited to commercial properties, including apartment buildings with more than 5 rental units. It’s really easy: figure out the gross annual income and subtract the property’s annual expenses, multiply the result by 10 and you have an estimate of what the property is worth.

Knowing the approximate value of your intended property ensures you’ll have a nice return on your investment. You’ll be sure that you aren’t overpaying, especially once you take the property’s condition into account.

Are you a first time investor? Realnet can help you build your portfolio! We have a large selection of South Florida real estate foreclosures for you to choose from. buying investment property is an adventure, and we can be your guide!

Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Greg, it's best for first-time investors to hire an agent who specializes in investment properties to help them. I wouldn't recommend they go at it alone. :)


May 11, 2012 05:26 PM
JOSH EVANS *JoshEvansHomes 516-655-5000
Village Properties of Mineola, LLC - Mineola, NY
Great blog and great job. Keep up the good work and good luck to you this year. Thanks.
May 11, 2012 08:18 PM
David Cole
David Cole CPA - Orlando, FL
David Cole CPA

replacement cost method is a great tool! that give you the actual value of the property over Comp sales

May 11, 2012 09:05 PM
Mark Loewenberg
KW of the Palm Beaches - Palm Beach Gardens, FL
KW 561-214-0370

what websites do you find that can help us with at least close evaluations?

May 11, 2012 10:01 PM
Greg Vander Wel
Realnet Tampa Bay - Tampa, FL


A lot of people use Zillow for estimates.  But I don't consider them to be very accurate.  I do like recent MLS comps, but more and more we are relying on our own expertise of neighborhoods to estimate value.  


Thank You for the comment!

May 21, 2012 01:52 AM