Value a House

Here’s a model to value a residential rental home. If you consider it an investment, then you should try and buy it for less than it’s worth. Value here is driven by the amount you can charge for rent (and any improvements that allow you to raise rent).

Fill in the Yellow boxes!

P.S. a smart guy’s opinion — Professor Damodaran.

Only assets that are expected to generate cash flows can have intrinsic values. Thus, a bond (coupons), a stock (dividends), a business (operating cash flows) or commercial real estate (net rental income) all have intrinsic values, though computing those values can be easier for some assets than others. At the other extreme, fine art and baseball cards do not have intrinsic value, since they generate no cash flows (though they may generate a more amorphous utility for their owners) and value, in a sense, is in entirely in the eye of the beholder. Residential real estate is closer to the latter than the former and estimating the intrinsic value of your house is an exercise in futility.