Unfortunately, there is no special book for property investors to look up the cost of a specific property before investing. Therefore, you need to know how to estimate the market value of your potential property investments. With the help of the Internet, it is simple to get a rough estimate of the current market value of any investment property.
What Is Market Value?
Market value is the most likely price that a property will bring in an open and competitive market. There is a difference between a property’s appraised value and the tax-assessed value.
The appraised value of a property is the estimated value as determined by a licensed professional who uses the proper methods of appraisal for your property type. The tax-assessed value is the value of the property according to the local taxing authority, including any improvements to the land for property tax reasons.
Comparison Sales Strategy
The comparison sales strategy for determining current market value on an investment property is based on the recent sale prices of surrounding properties that are of the same quality, size, etc. In order for this strategy to work properly, you must make adjustments for properties that were sold at unrealistic prices or under terms that may not be available to all investors.
Income Strategy
The income strategy can be used to estimate the worth of a property that will produce income on the basis of the net income produced by the property. According to this strategy, the current property value can be determined by using the capitalization rate, which can be calculated by dividing the annual net income of the property by the purchase price. You can also use the gross rent multiplier by dividing the purchase price of the property by the monthly gross income that it produces.
It is important, if you plan to be a successful investor in the real estate market, to know how to accurately determine the current market value of any potential investment property. Take the time to learn these methods, to ensure that you do not fall victim to overpaying for your investment properties.
Property Options Australia
Property Options Blog © 2006 – 2009
Hi Sean,
Again, it’s clearly a vital skill to be able to estimate the current market value of any property. I think you’d need some serious experience at this before you’d be able to rely on your figures.
I’d really rather have a mentor to teach me how to do this process and go over my figures until I had this mastered. It’s too important to learn to do on my own.
Whether you are buying, selling or a real estate agent having a accurate value of a property is essential for all. Thanks for pointing out the different ways a house may be valued…such as by a appraisal or by a professional valuer.