As an appraiser, I use multiple property valuation methods depending on the situation, but I'm curious what investors actually find useful. Do you rely on comps, income approach, cost approach, or some combination? How do you validate the numbers you're seeing, especially in hot markets where comps might be inflated? What property valuation methods give you the most confidence when making offers?
For investment decisions, I find the income approach using cap rates to be the most useful property valuation method. It focuses on the actual cash flow potential rather than what similar properties sold for. That said, I always check comps too, but in hot markets comps can be misleading if everyone's overpaying. The cost approach is least useful for existing properties unless there's something truly unique about the construction.
I use multiple property valuation methods as a sanity check. If the income approach, comps, and cost approach all give me roughly the same number, I feel more confident. The discrepancy between methods can reveal opportunities or risks. For example, if comps are high but the income approach shows terrible cash flow, that's a red flag. I also look at price per square foot compared to rent per square foot - that ratio tells you a lot about valuation.
As an appraiser, I use all three property valuation methods but weight them differently depending on property type. For residential rentals, comps get 60-70% weight, income approach 20-30%, cost approach 10%. For commercial, income approach dominates. The key is using recent, truly comparable sales - not just anything that sold nearby. I see investors make this mistake all the time in property valuation methods, comparing properties that aren't actually comparable.