A correct portfolio valuation will assess how your property performs relative to time, energy, and capital you put into it. For such accuracy, you’ll need to know the value of the properties themselves. But, the portfolio is an asset as well. It has its own value, which may be higher, lower, or equal to the sum of its contents’ values. This blog offers some basic facts about portfolio valuation. We intend to equip real estate investors with some tools for understanding whether their portfolio has an accurate value.

Turn to the Best

Before you can consider whether your portfolio has an accurate valuation, you need to get it valued. To do this, you need to depend on the expertise of reliable professionals. Choosing professionals is no different than in any other industry. You’ll need to evaluate the individual’s reputation, prior work, and check their referrals. Also, you’ll need to establish a rapport. If (for whatever reason) you can’t trust them, you will have trouble believing their assessment of your property.


Depending on how large or spread out your portfolio is, you may need several appraisers to assess each property. They will inspect, analyze, and value each property accurately. This may take some time, particularly if their findings require attention (e.g., termites, plumbing issues, electrical upgrades).

Choosing the right professional is critical here. You need to understand how relevant each facet of your property is in contributing to its value. With all of your property accurately assessed, the sum of their values establishes a baseline for valuing your portfolio. Without these values, you can still evaluate your portfolio’s worth as a whole. However, you'll find it much harder to find someone who can give you an accurate number.

Asset/Estate Planners

The right asset manager or firm will understand exactly how to assign your assets to a business entity that can own and manage them. For example, series LLCs allow you to put several properties in one entity while still insulating them from liability. Knowing which instrument to use requires careful consideration of your situation. Some investors are looking to plan their estate. Others intend to sell their portfolio at a specific time.

When one attempts to sell a portfolio, its structure comes to light. A shrewd planner will mitigate any issues related to the sale or transfer of your assets. They will have also established each asset in an entity that facilitates their proper management. That added value should figure into any assessment of your portfolio.

How to Know Whether your Number is Accurate

There are mainly two ways of assessing your portfolio’s valuation. Which one you use will depend on whether you've gotten an appraisal of each property. In many cases, appraising every property is infeasible. However, if you can, your aggregate value provides an important benchmark for how you proceed.

Understanding your Number without Appraisals

You can still assess the value of your portfolio without appraisals of each property. Commercial data sources such as CoStar and RCAnalytics.com provide excellent information on portfolio transactions. So, you can look up sales of portfolios that are similar to yours, and track those numbers.

To do this, you must be mindful of the differences in the two sets of properties. If your properties are in Las Vegas, and the reference portfolio has holdings in New York State, then you may want to dig further. You want to find portfolios that have properties that compare with yours as much as possible. Agriculture, scenic beauty, access, and HOAs are but a few variables that affect comparisons. Thus, the more portfolio sales that you find, the more likely those sale prices may form a useful trend. No portfolio will be just like yours. But, with enough data, you should learn enough to know whether your current valuation is accurate.

Understanding your Valuation with Appraisals

As stated earlier, the appraisals of your properties add up to a baseline value of your portfolio. If you organize your portfolio in a manner that facilitates management, it may warrant an additional premium. A premium also reflects the value to the buyer for not having to acquire these properties separately. However, if your holdings have separate entities and are time-intensive, then you may need to offer a discount. Proper structure results in higher profitability, and thus more value.

Publications such as CoStar provide data on portfolio sales by tracking averages based on pricing per square foot. These figures converge on different averages for each asset class (industrial property, multi-family, retail). The average sale prices vary between asset classes because the price volatility also does. Moreover, price volatility is a function of income volatility.

For example, an apartment complex has low volatility, because tenants are continuously moving in and out. Therefore, income remains relatively stable over the long term. Therefore, a portfolio comprised of multi-family dwellings would offer a small discount to someone wishing to buy it. However, an office building often only has one tenant. A portfolio of such properties historically provides a much higher discount.

Other Things to Consider

Additional metrics are available for comparing portfolios within asset classes. Capitalization rate (a ratio of price to operating income) is one such metric. For any metric, if your portfolio is a hybrid of various asset classes, you can compare its value to a weighted average of values of other asset classes. Knowing your property’s profitability, operating income, and baseline value will get you started.

Always compare apples to apples. If you cannot find sales data for the metric you are trying to use, then create it, or use a different metric. Knowing how your property stands out financially will enable you to sell it at the price you want. To understand this, you need to compare your financials to similar portfolios.

Unparalleled Property Management with MGR

With the help of MGR Property Management, the stress of handling your commercial or residential properties will be a thing of the past. So, if you are concerned about the value of your property portfolio, allow us to assist you. Call us at (909) 787-1959. We look forward to serving you soon!