How to Calculate Property Value Based on Rental Income?
Posted by Jag Sidhu PREC* on
Determining the value of an investment property is essential for real estate investors looking to make informed decisions. A property’s value can be assessed using various methods, with rental income serving as a key factor in the evaluation process. Understanding how to calculate property value based on rental income ensures that investors maximize returns and make sound financial choices. Below are the most commonly used methods for valuing rental properties.
1. The Gross Rent Multiplier (GRM) Method
The Gross Rent Multiplier (GRM) is a simple and widely used method to estimate property value based on rental income. The formula is:
To calculate the estimated property value using GRM:
For example, if similar properties in the area have a…
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