Valuation of Property Investments
Kavitha Menon | kavitha@ppfas.com Like equity, property purchased for investment purposes needs to be evaluated both quantitatively and qualitatively. Of the most common and simple ways of quantitatively evaluating value of a property is by rental yield. Both potential buyers as well sellers can use this tool to decide on the true price of a property. Here is how you calculate rental yields Net Rental Income = Monthly Rental X12 Less: 1) Rent for the Period Unoccupied Less: 2) Brokerage Expenses Less: 3) Maintenance Expenses Less: 4) Tax payable on rental income Less: 5) Repairs and Maintenance expenses amortized Net Rental Yield = Net Rental Income/Current Property Value Needless to say a high rental yield indicates an underva...