Trying to estimate the value of a piece of real estate seems to be everyone's favorite pastime. I've discussed this subject in detail in my books, What Every Real Estate Investor Needs to Know About Cash Flow and Mastering Real Estate Investment; in previous articles here on realdata.com; on PBS's Wealthtrack; in line at the supermarket, and just about everywhere else I'm allowed to talk out loud. Although I thought I had covered the waterfront pretty well on this topic, I continue to be surprised by the number of people who still don';t fully understand that there are several approaches to estimating value, and that it is important to choose the one best suited to the particular property you have in mind.

First, some necessary preliminaries. Any (actually, every) real estate appraiser will tell you that there are three approaches to value: the cost approach, the market data approach, and the income approach. While they will often try to reconcile these approaches when appraising a particular property, in many cases it is clear that one of the three methods stands out as the most appropriate for that property. Continue reading -->