What is a common method for determining rental property value?

Market analysis, or comparative rental analysis, is a widely recognized method for determining the value of rental properties. This approach involves comparing similar properties within the same area to assess rental rates and overall property values. By analyzing the rental prices of comparable properties, often referred to as "comps," appraisers and property managers can establish an accurate value for the subject property. This method is particularly useful because it reflects current market conditions and demand, which can fluctuate over time.

In contrast, cost estimation focuses on the expenses incurred to build or replace a property rather than its market value, making it less relevant for determining rental value. Historical valuation considers past values and trends, which may not accurately represent the current rental market. Cash flow forecasting analyzes the potential income a property can generate, but it does not directly assess the market value itself. While all these methods provide useful insights, comparative rental analysis remains the most effective for determining the value of rental property in today's market.