Eight-Step Approach to Estimate a Property’s Current Market Value

Use the following eight-step approach and the current value worksheet on the following page to get a rough estimate of a potential investment property’s current market value:

Step # 1: Log onto your county’s property appraiser or assessor’s Web site to obtain the tax assessed value of the property under consideration.

Step # 2: Search your county’s property tax rolls for recent sales of three to five properties that are comparable in size, amenities and features, and located within two miles of the property under consideration.

Step # 3: Carefully analyze any comparable properties that you find, and make sale price adjustments for differences in amenities, special features and the property’s physical condition.

Step # 4: Verify the income and expenses that are listed on the income and expense statement of the property under consideration.

Step # 5: Analyze the property’s income and expenses for the past twelve months to estimate its net operating income potential.

Step # 6: Calculate the property’s capitalization rate by dividing its potential operating income by the estimated value that you derived from analyzing recent sales of comparable properties in step number three.

Step #7: Estimate the property’s value by multiplying its net operating income by the capitalization rate you came up with for the property.

Step # 8: Calculate the cost of replacing the improvements on the property using the same building materials and method of construction.