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Real estate appraisal for rental properties isn’t the same as for single family homes. If you were looking at a 24-unit building, it would be difficult to find similar ones nearby that have recently sold. Therefore, a market analysis using comparable sales isn’t normally used.

It is also not ideal to use replacement costs either. How do you figure replacement cost if there is no land for sale nearby with proper zoning? This is used as a secondary method, though, and can tell you if maybe you should be building instead of buying.

Real Estate Appraisal Using Capitalization

Investors buy rental properties for the income. Therefore it is the income that is used to determine value. The rate of return expected by investors in a given area gives you the capitalization rate, and this is what you use to accurately appraise an income property.

Start with the gross income. Subtract all expenses, but not including loan payments. If a building’s gross income is 82,000 per year, and the expenses 30,000, you have a net before debt-service of 52,000. Now apply the capitalization rate to this figure.

If the common capitalization rate is .10, for example (ask a real estate agent), divide the income of 52,000 by .10, and you get 520,000. This is the value of the building. If the usual rate is .08, meaning investors in the area expect an 8% return, the value would be 650,000.

Easy Real Estate Appraisal?

Net income before debt-service, divided by the “cap rate:” It really is a simple formula. The tough part getting accurate income figures. Is the seller showing you ALL the normal expenses, and not exagerating income? If he stopped repairs for a year, and is showing “projected” rents, the income figure could be 15,000 too high. This would mean the building is worth 187,000 less (.08 cap rate) than your appraisal shows.

Another thing smart investors do when buying, is to separate out income from vending machines and laundry machines. If these provide 6,000 of the income, that would add 75,000 to the appraised value (.08 cap rate). Do the appraisal without this income included, then add back the replacement cost of the machines (probably much less than 75,000).

Be careful when using any real estate appraisal method. No formula is perfect, and all are only as good as the figures you plug into them. Used wisely, though, real estate appraisal using capitalization rates is one of the most accurate methods.

North Dakota Real Estate Wide Open Spaces and Wildlife

North Dakota is truly the state of wide open spaces and wildlife. With a small population base, North Dakota real estate is extremely affordable.

North Dakota

Made famous, or perhaps infamous, by the Fargo movie, North Dakota is the state for you if youre looking to get away from everything. The state seems to have far more animals than humans, which has also lead to the lowest crime rate of any state in the country. While the state is irrefutably cold during the winter, it can be very nice during the rest of the year. During said period, outdoor activities are plentiful, particularly considering large sections of the state have been designate refuges for such animals as the bison and the big horn sheep. Admittedly, North Dakota is not for everyone, but it is hardly the end of the world as some portray it.

Fargo

What? You were expecting me to start with another town? Made famous in the movie carrying its name, Fargo is a sleepy, little town. A comfortable downtown area is surrounded by neighborhoods populated with friendly people. The pace of life is definitely of the laid back variety. You will not find the rat race or rush hour traffic here. On the other hand, you can raise your family without the risks of bigger cities.

Grand Forks

Home to the University of North Dakota, Grand Forks is a quaint little town with a definite new feel. The town was devastated during a freak flood in 1997, but has seen significant redevelopment efforts reinvigorate it. The town has tree-lined streets and neighborhoods of white picket fenced homes. Unfortunately, the economy is rumored to be less than stellar, so make sure you investigate before relocating.

North Dakota Real Estate

North Dakota Real Estate is very inexpensive. A single-family home is going to run you between 130,000 and 200,000 depending on the location. With cold winters and such low prices, it is a surprise that North Dakota real estate appreciated at a hearty nine percent in 2005.

When the state nickname is based on the beloved University of Nebraska college football team, you know all you need to. With inexpensive prices, youll have your pick of Nebraska real estate to watch the games.

Nebraska

To the surprise of many, Nebraska is a state with a history of significant personalities and events. Figures such as Crazy Horse and Walter Reed were prominent during the expansion of the country to the west. While Nebraska is often derided as a flat state, there is something to be said for the peaceful and hypnotic swaying fields of wheat that cover the state. If youre looking to live in a state valuing traditional American values, Nebraska will do the trick without wiping out your bank account.

Lincoln

Lincoln is home to the University of Nebraska and Go Big Red! is a theme in this town with a lot of culture. While the University dominates the town, it does so to the benefit of residents. Lincoln is full of little shops, cafes and restaurants you would expect to find in a college town. What sets the town apart is the passion for college football. Lincoln is the place where 75,000 people will fill the stadium to watch the Cornhuskers have a practice game against themselves. Euphoria or depression follow the result of Saturday games each fall. All and all, Lincoln gets a big thumbs up.

Omaha

Omaha is the biggest city in Nebraska and the state capital. The city is fairly prosperous, but generally unremarkable. The highlights are the downtown area, a solid collection of museums and impressive zoo. Unlike Lincoln, the overall atmosphere is a low key one. While the lack of energy might trouble some, it is a good, solid place to raise a family.

Nebraska Real Estate

Nebraska real estate is generally inexpensive. Single family homes will run from 140,000 to 220,000 on average throughout the state. In 2005, the appreciation rate for Nebraska real estate was a very modest 5.5 percent, the eighth lowest in the nation.