It is generally recognized that if property is suitably improved its rental is a safe guide to value. This assumes the building to be fully rented at normal rents. The net rental is of course the amount of net income received by the owner and this sum capitalized at an appropriate percentage gives the value. Different rates may be used when land and building values are separated and of course due allowance should be made for the depreciation of the building.

A shorter method than the foregoing is that of estimating the value from the amount of the gross rents. The following table gives percentages of gross rents to values of some standard building types:

The amount of service given to the tenants must be considered in determining which rate to use for any particular building. It should also be noted whether the rents are likely to be maintained, or have been increased as the result of a temporary condition. It may be safer, in attempting to value some buildings on the basis of gross rental, to take, not the rents actually being received, but those which are recognized as the fair rents for similar space. Apartment buildings in a given locality may be worth on the average a rent of twenty dollars per room per month. If one particular house happens to be rented at thirty dollars per room it is likely that the owner has taken advantage of a temporary shortage of housing space to obtain an unusually large rent. Instances have been found in which a building has been filled up by giving special inducements to tenants to rent space in it. The necessity of care in capitalizing gross rents to get a value is apparent.

Sometimes a rough estimate of value is made by traders by multiplying the gross rent by a certain number. Thus the value of an ordinary apartment is approximated at five, five and one-half, or six times the rent.