In real estate transactions, I use the cap rate to determine valuation. The cap rate is the net income (after manager expense) divided by the value of the asset. If the net income is $100k on a $1M asset, then the cap rate is 10%. I always include the manager expense, otherwise the value is overstated. The cap rate can vary greatly. In a slow growth/ stagnant market, the cap rate may be 12% - 15%. In a fast growth/appreciating market, the cap rate may be 4-6%. Depends greatly on the appreciation of the real estate market. In Colorado Springs, for years the cap rate was stated at 12%. Real estate has skyrocketed with 18% appreciation annually. So, conversely if I find a business with net income of $200K with a cap rate of 10%, the valuation is near $2M. The condition of equipment and building may increase or decrease the valuation a bit. Obviously, if the business is not showing a net profit, then the business is book value. Value of the land plus the structure.