How do real estate investors typically determine the fair market value of a property?

Determining the fair market value of a property is a critical process for real estate investors, and the most effective method involves considering recent sales and the property condition. This approach relies on the principle of comparative market analysis, where the investor examines recently sold properties with similar characteristics in the same geographic area.

By analyzing recent sales, investors can gain insights into what buyers are willing to pay and establish a more accurate valuation based on current market trends. Additionally, assessing the property condition is essential, as it can significantly affect the value. Factors such as renovations, repairs, and the overall state of maintenance play a crucial role in determining how a specific property compares to others on the market.

This method is preferred because it is rooted in real-world data, reflecting current market dynamics, and allows for a more reliable valuation that investors can use to make informed decisions.