Critical Financial Ratios to Value Property (Intrinsic Value)

In the real estate market, the situation is not so simple. Investors are never sure of the value of a certain property until the point at which they are about to sell or rent it.
Property valuation methods are needed for estimating the most probable value of a property on the market. Yields are important in a number of contexts:

• Property valuations can be made by analysing price and yields 
• The returns from property should be compared with other forms of investment, and with other properties
• To evaluate whether property is overvalued and if a price bubble might be forming

For example,
Net Rental Yield (NRY) is used to compare the performance of property A versus property B versus property C.

Return on Investment (ROI) is used to compare the performance of Stock A versus Property B versus Bond B versus Gold.

Internal Rate of Return (IRR) is used to compare the Risk/Rewards of different types
of investment classes versus targeted returns.

         Table from SPW 170 issue