Small Apartment Investors

How to Calculate Apartment Value

Calculating the apartment value is very crucial when you are buying or selling it. You can enter into good deals only if you know the real value of your apartment building. Generally in the process of lending to the apartment properties the banks and other institutions adopt one of the following methods to arrive at the value of the apartment:

  1. Sales method in which the sale price of a similar apartment building in the same locality in a sale that happened in the recent past is taken as the value of the apartment. This may not be correct as no two apartments will be similar in all respects.
  2. The replacement approach in which the amount of money that may be required to build a similar apartment building now with all related expenses is calculated and this is taken as the value of the apartment.
  3. The income method is the way of calculating the value of the property as per the amount of income it is generating at the time of the transaction. This is fairly the best way to ascertain the value of the apartment as the lenders value the profitability of the property after analyzing the income and expenses. It is the best approach to value the apartment as what you are going to invest in is not on a property but on business.

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