Certified Residential Appraiser Practice Exam

What does investment value represent for an investor?

1. The current market price of the property

2. The value of a property interest based on specific investor requirements

3. The price a property would sell for in a competitive market

4. The total value of all assets of a business

The correct answer is: The value of a property interest based on specific investor requirements

Investment value specifically represents the value of a property interest tailored to the unique preferences and circumstances of a particular investor. This concept encompasses the idea that different investors may assign different values to the same property based on factors such as their financial situation, investment goals, risk tolerance, and the specific metrics they utilize for evaluating potential returns. In the context of real estate, investment value considers what the property would yield for that investor, factoring in their individual investment strategy and the expected cash flows or appreciation they hope to achieve. This is distinct from the more general concept of market value, which assesses how much a property would sell for in an open and competitive market, without regard to the particular needs of individual investors. Thus, investment value goes beyond just monetary considerations, integrating qualitative aspects of an investor’s anticipated use, financing arrangements, and personal investment criteria.