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    repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compen
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    Fair market value determines a property's worth. It is simply the amount someone in the current market would be willing to pay for a property. Every piece of real estate has some value whether it is in good or poor condition. If a property is priced right, no matter the market conditions, it will sell. If a property sits on the market without interest from any buyers, the seller is asking for too much. There are a number of methods that can be used to determine fair market value:

    Comparable Approach: You can determine a property's fair market value through the use of comparables by assuming that the property will sell for the same price that other properties similar to it have sold for. This is a very accurate way of determining what a property is worth. Make sure to compare the property of interest solely to properties that have sold recently, no longer than a year ago. Properties that have sold recently are proof of what someone is willing to pay for them; properties for sale merely show you what the seller hopes to get. Before you can use this method of determining fair market value, you need to understand what makes a property comparable to another. Most important is the comparable property's neighborhood. It must be located in the same neighborhood to achieve an accurate comparison.

    This does not mean they have to be on the same street, but in the same general region and caliber of neighborhood. Secondly, the type of properties to be compared must be alike. Do not compare a duplex with a single family home or a manufactured home with real property. The values of these types of properties vary significantly. Thirdly, the properties must share similar amenities: number of bathrooms, bedrooms, appliances, square footage, parking, landscaping, fencing, etc. Lastly, the condition of the properties: do they need any major repairs, and if so, how much will the repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compens

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    alue:

    Comparable Approach: You can determine a property's fair market value through the use of comparables by assuming that the property will sell for the same price that other properties similar to it have sold for. This is a very accurate way of determining what a property is worth. Make sure to compare the property of interest solely to properties that have sold recently, no longer than a year ago. Properties that have sold recently are proof of what someone is willing to pay for them; properties for sale merely show you what the seller hopes to get. Before you can use this method of determining fair market value, you need to understand what makes a property comparable to another. Most important is the comparable property's neighborhood. It must be located in the same neighborhood to achieve an accurate comparison.

    This does not mean they have to be on the same street, but in the same general region and caliber of neighborhood. Secondly, the type of properties to be compared must be alike. Do not compare a duplex with a single family home or a manufactured home with real property. The values of these types of properties vary significantly. Thirdly, the properties must share similar amenities: number of bathrooms, bedrooms, appliances, square footage, parking, landscaping, fencing, etc. Lastly, the condition of the properties: do they need any major repairs, and if so, how much will the repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compen

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    someone is willing to pay for them; properties for sale merely show you what the seller hopes to get. Before you can use this method of determining fair market value, you need to understand what makes a property comparable to another. Most important is the comparable property's neighborhood. It must be located in the same neighborhood to achieve an accurate comparison.

    This does not mean they have to be on the same street, but in the same general region and caliber of neighborhood. Secondly, the type of properties to be compared must be alike. Do not compare a duplex with a single family home or a manufactured home with real property. The values of these types of properties vary significantly. Thirdly, the properties must share similar amenities: number of bathrooms, bedrooms, appliances, square footage, parking, landscaping, fencing, etc. Lastly, the condition of the properties: do they need any major repairs, and if so, how much will the repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compen

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    eighborhood. Secondly, the type of properties to be compared must be alike. Do not compare a duplex with a single family home or a manufactured home with real property. The values of these types of properties vary significantly. Thirdly, the properties must share similar amenities: number of bathrooms, bedrooms, appliances, square footage, parking, landscaping, fencing, etc. Lastly, the condition of the properties: do they need any major repairs, and if so, how much will the repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compen
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    repairs cost? If you struggle to find similar properties that have sold recently, you may need to deviate from the amenities a little, but compensate for the difference. For example, if you are trying to find the fair market value of a three-bedroom home, but only two-bedroom homes have sold in the neighborhood, you can still use them as comparable properties to the three bedroom. You just need to add some value above and beyond the sales price of the two bedrooms to compensate for that extra bedroom.

    Income Approach: With the income approach method of determining a property's fair market value, an investor uses the income that the subject property produces in comparison to the income that is produced by properties that have sold. This comparison can be made in two ways: with the property's capitalization rate (cap rate) or with the property's gross rent multiplier (GRM).

    Capitalization Rate: To determine a property's capitalization rate or cap rate, you divide the property's Net Operating Income or NOI by the purchase price. The higher the cap rate, the greater the returns will be for the buyer. By asking what a property's cap rate is first, an investor can save time. If the cap rate is not even close to what the investor finds satisfactory, instead of going through the list and routine of analyzing a property, he can move on to the next property of interest. Many owners, especially of small properties, do not know what a cap rate is, but if you know the property's Net Operating Income, then you can quickly determine it yourself. Similar properties usually sell for similar cap rates. By becoming familiar with the market cap rate, you can determine quickly if a seller is asking for more or less than fair market value. Whether the seller provides you with the cap rate or you determine it yourself, it must still be verified with the property's financial statements; income and expense statements and more importantly its Schedule Es.

    Gross Rent Multiplier: To determine the gross rent multiplier of a property, or a property's GRM, you divide the sales price by the property's gross annual rent. If a property has a gross annual income of $10,000 and can be purchased for $80,000, the seller believes that an annual GRM of 8 is appropriate, (80,000 / 10,000 = 8). The lower the GRM of a property, the

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