How to figure out what your rental property is really worth

There are four primary methods a real estate investor or agent can use to evaluate the potential value of a rental property.

No one method is perfect. Each is a rule of thumb; if buyers or agents use more than one on the same property, they can get a better picture of its value.

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The sales comparison approach (SCA)

The sales comparison approach (SCA), also known as comps or the price-per-square-foot method, compares a property to comparable properties that have recently sold in the area.

Gross rent multiplier approach

The Gross Rent Multiplier (GRM) functions as the ratio of the property’s market value over its annual gross rental income.

The income approach

The income approach allows investors to estimate a property’s value based on the income it generates.

The cost approach

In the cost approach, the value of a property is determined by what it would cost to rebuild the building if it was demolished or to build a similar structure.