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!