How to Determine the Current Value of Your Investment Properties
By Michelle Clardie on 08/27/2025.
Reviewed by Josefin Gatsby
Knowing the current value of your investment properties is a crucial part of being a successful real estate investor. In addition to tracking your return on investment (ROI), understanding how much your properties are worth can help you adjust insurance coverage appropriately, confirm that your property tax assessments are fair, and make informed decisions regarding refinancing and selling.
In general, the fair market value of your property is the price a willing buyer would pay if the property were listed for sale on the open market today, assuming you and the buyer both have reasonable knowledge of the property and neither is under pressure to buy or sell.
There are multiple ways to determine the current value of your investment properties, from informal calculations you can do yourself to formal appraisals that can serve as proof of value when refinancing or selling.
Option 1: Calculate the Value Yourself
Calculating a property’s current market value is a useful skill for real estate investors. But it takes substantial industry knowledge and a bit of practice to accurately value property.
The first thing to know about DIY property valuation is that there are three primary approaches to determining value:
Market approach: Uses recent sales of comparable properties (comps) to estimate how much a property is worth. Market approach is commonly used for single-family homes and small multi-family buildings (of four units or fewer) that are likely to be purchased by owner-occupants or modest individual investors.
Income approach: Uses the income generated by the property to estimate its value. The income approach is best for multi-family properties consisting of more than four units (which are technically classified as commercial property rather than residential). These are properties where the buyer is most likely an investor who bases their purchase decision on the income-generating potential of the property.
Cost approach: Uses the cost to rebuild as the baseline for the value. The cost approach is less common than the other two, but may be used for unique properties without relevant comps or new construction projects where the actual costs are recent and well-documented.
How to Calculate Property Values Using the Market Approach
For a DIY valuation using the market approach, follow these steps:
Find recent comps. Look for recent sales of properties that are similar to your property in size, location, condition, and age. Reliable information can be found through your local MLS (multiple listing service). If you don’t have access to your local MLS (as most MLSs require membership), you can use sites like Redfin, Zillow, or Realtor.com. Ideally, you should identify 3-5 comparable properties that sold within the last 3-6 months. In a slow market with fewer sales, you may need to consider sales from the past 12 months.
Adjust the comp sales prices to account for differences. Increase or decrease each comp’s sale price to account for features your property doesn’t share. For example, if a comp has a three-car garage, and your property has a two-car garage, you would subtract the value of that extra bay from your comp’s sales price. This is where market knowledge is necessary. You need to know how much features are currently worth in your local market. Pools, views, outbuildings, finished basements…these features all affect the value of the property.
Calculate the estimated value per square foot. Divide each comp’s adjusted value by the square footage of that property to determine the comps’ adjusted prices per square foot. You can then average those values and multiply the result times the square footage of your property to determine the property’s current market value.
How to Calculate Property Values Using the Income Approach
To value your investment properties using the income approach, simply:
Determine net operating income (NOI). Subtract annual operating expenses (taxes, insurance, maintenance, etc.) from the annual rental income to calculate NOI.
Find the capitalization (cap) rate. The cap rate is a percentage that indicates risk and reward for a given investment property. You can research your market’s typical cap rate for similar properties online or contact a local commercial real estate broker to inquire about cap rates for your property type.
Calculate the estimated value. Divide your NOI by the cap rate to determine the value. For example: a $30,000 NOI ÷ 6% cap rate = $500,000 value.
How to Calculate Property Values Using the Cost Approach
If neither the market approach nor the income approach is suitable for valuing your property, complete the following steps to determine the value using the cost approach:
Determine the land value. Research recent sales of vacant lots similar in size, location, and zoning to your land to determine how much the land itself is worth. Make sure you’re looking at the price per square foot of comparable lots. Then find an average price per square foot and multiply that value by the square footage of your lot.
Estimate replacement or reproduction cost. Calculate how much it would cost to rebuild the existing improvements (the structures on the land) today. In most cases, it makes sense to use replacement cost (the cost to build a structure with similar utility using modern materials and standards) rather than reproduction costs (the cost to build an exact replica). You can use construction cost guides (like Marshall and Swift), builder estimates, or online calculators.
Estimate depreciation. Depreciation is the amount of value the structure has lost since it was built due to factors like wear and tear, functional obsolescence (outdated layout, systems, etc.), and external obsolescence (declining neighborhood, zoning changes, etc.).
Determine the current value of the improvements. Subtract the estimated depreciation from the estimated replacement cost to calculate the value of the improvements.
Calculate the total estimated value for the property. Add the land value from step 1 to the current improvement value from step 4 to determine the property’s total value.
Option 2: Get Help from a Real Estate Agent or Broker
If you don’t yet have the experience or local market knowledge to determine the current value of your investment properties yourself, you can ask a local real estate agent or broker for assistance.
Real estate agents regularly offer free Comparative Market Analysis (CMAs) to property owners in the hopes of establishing a relationship and becoming your go-to for future acquisitions, sales, and referrals. These CMAs are essentially reports using the market approach to value. Asking for a CMA can be a good way to get an informal valuation for your property while meeting qualified real estate professionals who could potentially help you with future deals.
If you need something slightly more formal (or if you have a larger multi-family property that requires more time and effort to review), you might order a Broker’s Opinion of Value (BOV). For a fee, real estate brokers will invest time in drafting a more detailed valuation. BOVs are often used as quick, affordable valuations used during preliminary analysis of possible sales, acquisitions, or refinancing. In many cases, they can also be used to dispute property tax assessments.
Option 3: Hire an Appraiser to Conduct a Formal Appraisal
An appraisal, a formal valuation by a licensed appraiser, is widely considered to be the most accurate way to determine the fair market value of a property.
Appraisals are more expensive than BOVs, but they can serve as evidence of the property’s value when refinancing, buying, or selling. For example, if you used mortgage financing to purchase any of your properties, the lender likely required an appraisal to confirm the value of the property as collateral for the loan. Similarly, if you are applying for a cash-out refinance (as is common when using the BRRRR method of real estate investing), the lender will likely require a formal appraisal to determine how much equity you hold in the property and how much can be cashed out.
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