Residential Investment Properties

How do investors compare the incomparable?  There are objective measures and subjective measures.  While it is useful to use objective standards, as will appraisers for your bank loan, to help you make decisions, the subjective standard, should not be discounted. 

There are five basic methods of numeric valuation of residential investment properties. 

  • Price Per Unit: Price divided by the number of units equals Price Per Unit 
  • Price Per Square Foot: Price divided by the number of square feet equals Price per Square Foot
  •  Gross Rent Multiplier:  Price divided by Gross Income equals Groos Rents Multiplier
  • Capitalization Rate: Net Operating Income divided by the Price equals the CAP Rate
  • Cash-on-Cash:  Cash flow before taxes divided by cash invested equals Cash-on-Cash

There is one critical subjective standard for investment properties:

Do I want to own this property?