Investing for Income or Appreciation

The Hurlburt Group has found there are two key steps in determining value. First, it is imperative your property has value in the market. This may sound obvious, but it is very important in our current market.Second, determine the best valuation method. For example, those who invest in income generating properties will most likely use the income method and others who are selling their residence may rely on comparable listings. Taking all approaches into consideration is prudent.

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Value:  To have value in the real estate market a property must have the following characteristics:


Scarcity: a finite supply

Utility: the properties usefulness for it’s inteneded purpose

Transferability: ownership rights transferred from one person to another

Demand: the need/desire for possesion or ownership backed by financial means

Investment value: There are three approachs to determining value of investment properties:

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An estimate of value is obtained comparing your property with recently sold comparable properties

The cost to rebuild the property considering value of land, current construction cost, amount of accrued depreciation

Gross income – vacancy/rent loss – operating expenses = net operating income (NOI)

NOI / rate of return = value
**Example: Susan wants to buy a duplex and would like a 10% (industry norm) rate of return. The NOI is $10,000.  Susan should pay $100,000 for the duplex. ($10,000 / 10%=value $100,000)