Fair market rental value

2

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

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

2 Comments

  1. From what I can see, there is a lot of hype about the local real estate market and how hot the rents are and sky high. What that does is attract a lot of speculators, investors and builders. The new buildings have smaller units, only they are flashing all of the bells and whistles. They have bling. Plenty of prospects view these and then go out and view larger units in older buildings and they are disappointed because they’ve already seen so much eye candy out there. I am also looking at the fact that people who own property are posting rentals at significantly lower estimates than what the experts computer generated estimates come in at. I think, there are those who are relying on media driven accounts to hold out for high paying tenants, and then there are those who are renting at the market and filling their vacancies.

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php