<p>One could resort to auction to get the "actual" value of a property (i.e. the buyers' maximum willingness to pay).</p>

<p>One way to say that a property is overvalued is from the fact that it doesn't get sold :)</p>

CC BY-SA 4.0
2020-01-01T14:04:22.007Z
2020-01-01T14:04:22.007Z
Art
<p>same as for a company, if you assume that you are buying it for the rent it will get you then the value of the asset is the sum of the discounted future cash flows (called FFO in RE)
you can also apply the comparables methods, in this field we usually apply it with a slight twist we read it in terms of yield (inverse of the multiple) which is called a cap rate and compare it to similar projects in similar areas for similar purposes.
this pdf is a good primer on all of this : 
<a href="https://www.merrilledge.com/publish/content/application/pdf/gwmol/bofaml-reit-primer.pdf" rel="nofollow noreferrer">https://www.merrilledge.com/publish/content/application/pdf/gwmol/bofaml-reit-primer.pdf</a></p>

CC BY-SA 4.0
2020-01-01T19:26:47.407Z
2020-01-01T19:26:47.407Z
Saad Filali Khattabi
<p>How do you calculate the intrinsic value or fair value of real estate?
I mean how do you determine that the house/commercial estate is undervalued or overvalued?</p>

<mathematical-economics><finance>
How do you calculate the intrinsic value or fair value of real estate?
SANKALP THAKUR
# How do you calculate the intrinsic value or fair value of real estate?

(Asked by: username_0 on 2020-01-01)

How do you calculate the intrinsic value or fair value of real estate?
I mean how do you determine that the house/commercial estate is undervalued or overvalued?

**Tags:** mathematical-economics, finance

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## 2 answers

### Answer by username_1 on 2020-01-01. Score: 0 | Accepted answer

One could resort to auction to get the "actual" value of a property (i.e. the buyers' maximum willingness to pay).

One way to say that a property is overvalued is from the fact that it doesn't get sold :)


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### Answer by username_2 on 2020-01-01. Score: 1

same as for a company, if you assume that you are buying it for the rent it will get you then the value of the asset is the sum of the discounted future cash flows (called FFO in RE)
you can also apply the comparables methods, in this field we usually apply it with a slight twist we read it in terms of yield (inverse of the multiple) which is called a cap rate and compare it to similar projects in similar areas for similar purposes.
this pdf is a good primer on all of this :
<https://www.merrilledge.com/publish/content/application/pdf/gwmol/bofaml-reit-primer.pdf>


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