Property Valuation and Methods?

architecture, building, infrastructure

Commercial Real Estate (CRE) Investor Question #88: What are the key elements of property value? What are the top valuation methods?

Real Estate Property Value consists of the following key elements:

Demand: the desire or need for ownership supported by the financial means to satisfy the desire.

Utility: the ability to satisfy future owners’ desires and needs.

Scarcity: the finite supply of competing properties.

Transferability: the ease with which property ownership rights are transferred.

Source: Reonomy

The key methods of property valuation, some of which we’ve seen earlier, are:

  • Income Approach – Based on income generated by the property
  • Sales Comparision Method – Based on comparable (comps) property sales
  • Cost Method – Based on the cost of building

A detailed article on the above methods is available at Reonomy!