How should I value my investment properties?
If you think that the value of your investment properties is relevant, then your thinking could well be skewed. The only number that really matters is the net rental income that each of the properties produces. And it is the net rental income from which you would calculate the value.
Having said that, it is possible that you could sell the property for more than its real worth (based on rental), and that implies that it is a bad investment that should be disposed of, and replaced by one that gives a better return. This typically applies at the top end of the market where selling prices of luxury apartments tend to be far, far higher than is justified by their rental potential. Typically, a R10m apartment will rent out for R40 000 per month, and that equates to a miserable gross return of 4,8%. Take the levies and maintenance off that, and the return is more like 4%. Anybody who holds on to investments like that should be in a different business.
Gross rental income (that is without deducting any costs) on residential properties should be about 11%, so a property pulling say, R8 000 per month is worth about R8 000 x 12 / 11% = R870 000. That means that the R10m apartment above is only worth R40 000 x 12 / 11% = R4,3m, so if you own one of these, get real and sell it! Then buy several smaller properties, like the R870 000 one above, give them to an agent to manage, and enjoy the significantly better returns. You should be able to double your income, even after paying 10% to the agent, plus you won’t have anything like the vacancy headache that you had before. Why? Because if one of your 11 small properties is vacant, you’re only down R8 000 per month, but if your only upmarket property is vacant (and, believe me, it will be – a lot), you are down by R40 000 a month.