Property investments are not small investments. Whether you are buying a home or an investment property, real estate is typically a sizable investment to make. One you do not want to take for granted and one you certainly don’t want to take an unnecessary loss on. That means you have to find a way to make sure that you are paying a fair price for the property you’re acquiring. That is where property valuation comes into the big picture – as a tool to protect yourself from investing in inferior properties at inflated prices.
What is a Property Valuation?
A property valuation, as the name implies, is when a professional comes out and carefully examines a property to determine a fair value for the property. The person conducting the valuation will often make notes and take photographs that will be included in the report you receive once the property assessment and valuation is complete. People invest in property valuations for many reasons, including the following:
- Buying a home or personal property.
- Purchasing investment properties.
- Insuring property.
- Determining someone’s net worth or tallying their assets.
- Determining an asking price to sell a property.
Property valuations are tricky because each property is unique in some way. All properties have unique features and selling points, points of interest, floorplans, building materials, craftsmanship in construction, creature comforts, and design appeal. That is in addition to coming in different shapes and sizes and in countless locations. Because of the complexities involved in property valuations, it requires a specialized professional to conduct them.
Who Conducts a Property Valuation?
Surveyors are skilled professionals who determine property values for potential investors. Whether you’re looking for a personal property to call home or an investment property in which you can begin building a nice nest egg for your retirement, it is in your best interest to invest in a skilled and reputable surveyor to determine the value of any property you’re considering purchasing.
The reports they create about the property are useful tools for you to know not only the value of the property in dollars and cents, but also the state of the property and areas where you will need to make an additional investment in order to maintain or repair the property. In other words, the information in the property valuation report is critical for helping you make informed purchasing decisions if you’re considering real estate investments.
How is Property Value Determined?
While the average person can’t simply look at a property and hazard a guess about its actual value, property valuations often do exactly that. Someone comes in and evaluates the property to determine its value so that you know if it is a wise purchasing decision for you. Property valuation professionals typically use one of three methods to value properties.
- Market comparison method. The property is compared to similar properties in the area that have sold recently.
- Income potential method. Value is determined based on its income potential.
- Replacement cost method. This method goes down to the nuts and bolts and values the property according to how much it would cost to rebuild or replace the property on the same land.
There are many key details property evaluators use to help them in their determination of a property’s value. These include things like the size and condition of the property including the size and condition of the property, how recently the property was constructed, recent sales of similar properties in the area, and the amenities the property has to offer that make it stand out. Your property valuation can help you determine if a particular property is a sound investment as a residential home or as an investment property.
Why is Property Valuation Important?
For anyone investing in or planning to invest in real estate, property valuations are the most effective tools for helping to determine the potential value a particular property offers. While the value of a property doesn’t always correlate to the cost or price of the property, it does give you a realistic idea of the real worth of the property outside of things like supply and demand that can drive up the costs of real estate in times of low supply and high demand. Banks tend to use the actual value of properties rather than the “going rate” so if you plan to get financing to fund your purchase, you’ll want to keep these numbers close at hand and make sure you can make up the difference in price and value elsewhere.
Smart investment decisions when investing in property begin with a good plan. Strategic Properties understands the challenges investors face when choosing solid investment properties and we are here to help. Contact us today to learn more about the property valuation process and learn how we can help you with all your property management, investment, and development needs.