How to find the true value of your property
Property Evaluation Methodology is known to be one of the important concepts that come with the investment of real estate. It could also be explained as the method by which the value of a property or building is accessed.
The value attached to a rental property is regarded as the most important reason that makes most people go into real estate business and also personal ownership. To get a deep understanding of what property evaluation methodology is, you would need to know the basics of it which is the property valuation. We would enlighten you briefly about property valuation and its importance.
Property valuation can simply be said to be the value of any building or property. This is also trying to say that without knowing the value of your investment property, you may not know how much it is worth and also the right amount to tag it if you want to sell the property.
You would also encounter problems knowing the right amount to pay in property taxes. You can't possibly know how to do these two actions listed above and some other property insurance without having the right knowledge of your investment property.
Knowing The Value of A Property
The idea of wanting to know the value of your property is the first step to take when you encounter some unexpected billing on tax and other similar issues are the right thing to do. A good and common way to know the value of your property is by making use of a home appraisal.
A home appraisal can simply be defined to be some sort of professional opinion that gives details about a real estate asset value when needed. And corresponding to this definition, a person that does such work is known as an appraiser. This species of people are known to be professionals in their field of specialization.
Methods for Property Valuation
As stated above, property valuation methods are steps that are taken to know the value of a property. Below are the outlined methods for determining property valuation.
- Sales Comparison Approach
The sales comparison approach, also known as the comparable sales approach or market data. This method of property valuation is regarded as the most common method of carrying out the process. A good example of the application of this method is in residential properties and single-family homes. You can be able to make appraisals possible in this method of property valuation by simply making a clear comparison of a real estate property with properties that are very similar when it comes to the sales price.
When properties are used for comparison in this method, these properties are referred to as comparables. The fact that not all types of property would work as comparables, you would only make use of specific properties that can serve as good comparables. And in such a situation like this, you can identify a good property to be used as a comparable is if they have the same attribute as the property that they are being compared to and also if success was recorded in their sales during the year, especially when market conditions were stable.
You should also note that no two comparables are similar.
Therefore, you could be tempted to ask the question; How accurate can this method be?
Hence in order to make things a bit more leveled there is a process that involves adjustments being made to sale prices. These adjustments made based on certain factors. These factors are known to be the factors that help to create an influence on the rental property market value. Therefore, this makes location the most important of this factor. It is the most important because it can alter the investment properties' sales prices in a very significant way.
Another aspect that comes into play is the physical aspect of the property. Some of these physical aspects are the number of bathrooms and bedrooms, the square footage, the interior of the property income and the condition. And the age of the property is another physical aspect that is taken into consideration.
- Cost Approach
This method of property valuation is the second method of carrying out the process of valuation. The cost approach has almost a similar concept from the sales comparison approach that states that the rental property shouldn't be bought by a real estate investor for a cost more than the cost of constructing a replica of the property said. A well known and often used property valuation methods are used in this approach and it is the sake comparison approach. Then there is a correct and accurate estimation of the cost of constructing the property and also ensured that depreciation is taken. When you realize the kind of real estate that this method if the valuation is used for, you would discover that it is what separates it from others. The cost approach is not used in the valuation of any residential or any form of income property real estate. Instead, it is used to evaluate any properties that are constructed and not meant to be sold. Such properties include; religious institutions, government buildings, schools, and hospitals. When the value of the properties of land has been estimated, it is then added with the given building cost that is attached to the real estate property. The costs of buildings also have different ways by which it can be estimated. A very common and known way is by finding out how much a square foot cost by simply doing multiplication of it by the total square footage of the comparables.
- Income Capitalization Approach
This method of property valuation is regarded as the final approach involved in the valuation of a property. This method is regarded as the method for all income properties. There are some common examples of buildings that make use of this method of valuation. These examples include; commercial real estate, apartment buildings, and multi-family homes. The work of the income capitalization approach is to take account of the net income of a property and the return of investment. This method of property valuation is subdivided into two property valuation methods.
- Direct capitalization tends to focus mainly on any property's income. This shows how the annual growth income of a property is estimated. Then there is also an estimation of the effective gross income. This is simply done by a consideration of the impact of vacancies. After this, the net operating income undergoes some calculation after the expenses have been subtracted. The value of the property then undergoes estimation by making use of the property's capitalization rate and net operating income.
- The second approach is said to pass through the gross income multipliers. This is a method that has been adopted for real estate properties that their purchases were not initially made to be income properties but in the end, they are used as such. There are some examples of this. A good example is the family homes. The annual gross income and monthly income of the rental property is calculated. In this process, the gross income multiplier is also calculated and is finally used to find the market value of the property.
When you have gotten a clear understanding of the property valuation methods, you can see how important it is to real estate appraiser, and there isn't any serious need me the landlords and investors should find out about the ins and outs that are done during the property valuation methods. The idea of someone knowing a little about how the valuation methods go is also a great idea.
How To Discover The Worth Of Your Property
You can also reach out to us and we could do a quick survey on your behalf. By complete reliance on our experienced specialist and knowledge as well as our access to the sector of Land Registry records for authorized sources, you can fully rely on us to make available for you quality and adequate knowledge for the effective date valuation that belongs to your home.
Discovering the actual worth of your property is beyond mere estimation and calculations. You would need the assistance of a specialist in that field and that is why we are here to serve you.
We would enlighten you on the basic ways to get along with the process and with our broad knowledge and years of experience, you can fully rely on our work to give you the accurate valuation of your property.
We have the privileged access to a good record of authorized Land Registry records and this is an added advantage to the job about to be done.
With accurate information, we would deliver to you about your property, it would much easier for you when it comes to selling your property, since you would know how much to expect and if you are getting top money for your property.
Source: C.N. Property Canvas Ltd.
Author: Christos Nikolaou
BEng Mechanical Engineering, MSc Real Estate, ETEK Property Valuer, Register and Licensed Real Estate Agent.Christos Nikolaou is the founder and Managing Director of Property Canvas, he holds a license as an Estate Agent from the Association of Real Estate Agents of Cyprus and he is a registered Property Valuer in the Technical and Scientific Chamber of Cyprus (ETEK). He is the author of our “How to find the true value of your property” and is a certified advance negotiator.
