Fair market rental value is just another step in the process of evaluating your investment property!
Rental values in most areas vary over time, market location, population need, community growth and community cost of living!
Rental values can also serve as an indicator of new and upcoming communities to invest in and serve as an indicator of a declining market.
Fair market rents are generally based on comparable rents in the area of investment but one should use common sense in this evaluation just as one would with comparables to determine the retail value of a subject investment.
We call this “Apples to Apples – Oranges to Oranges” evaluation. The comparable needs to be in likeness and location of the subject property you are trying to compare.
One way to determine the fair market value is to ask a real estate agent in the area for comparative rentals.
As an investor in some areas of investment you can gain more profit from a real estate say not only from the retail side of property but by adding an income approach in the valuation can produce a larger sales price. The income approach, the value of the property is estimated using the income, the property is expected to produce in the future.
You will find that this method is mostly used on commercial and multi unit property types but works well when selling a property that a buyer wants to hold and rent.
You will find a great web site with tons of data free at:
http://www.huduser.org/datasets/fmr.html
NOTE: The preceding information was originally posted in the BiggerPockets forums. Feel free to leave your comment in the original fair market rental value thread
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Article Author: Joshua DorkinJoshua has written 570 articles for us.
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Joshua Dorkin (@jrdorkin) is the founder and CEO of BiggerPockets.Mr. Dorkin's vision for BiggerPockets has helped to propel it into becoming one of the top real estate destinations online. His vision for the site and its future has brought national press attention to both Mr. Dorkin and to BiggerPockets.
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