How To Assess Real Estate Value For Property Investments

The value of any property affects many stakeholders, including the buyers, sellers and brokers. On a broader scale the real estate value of a property can determine the taxes owed, mortgage terms or screening tenants for rent prices. When real estate investors are planning to buy a property, they need to assess the real estate value to make sure they are getting a good deal. It can be confusing to learn how to calculate the value of a property. Keep reading to learn how to determine the right buying price to invest in real estate.

Assessed Value Of Property

Firstly, you might try to calculate real estate prices by the assessed value. Every property receives an assessed value from the local government. This is the value used for property taxes and government records. However, this real estate value can be very misleading. Often times, the actual value of a property is higher or lower than the assessed value. The difference is caused by the change in market pricing since the last assessment of the property. If you want to buy a property, use the assessed value to determine how much taxes will be owed. Then, factor that tax amount into your real estate valuation. Do not rely on assessed value for pricing alone.

Assessing Real Estate Market Value

More effectively, investors can determine real estate value using the market. Using a market based approach, you can perform a comparative market analysis. In this process, you find similar properties in your area that have similar features to your desired investment. Then, you compare the sale prices of those houses in the past 6 months. The comparison will give you a direct range to value the property. When you take into all of the factors like the house condition, appliances and features, the value can be adjusted accordingly. The market value approach is one of the best ways to calculate real estate value.

Appraisal Real Estate Value

Next, investors can leave the assessment value to the professionals. A licensed appraiser provides a professional’s view on the current market and value of the property. Typically, this property value is used by mortgage lenders to determine the cost of a loan. Of course, this real estate valuation should come very close to your market value approach. In many cases, investors can order a professional appraisal for peace of mind or just to verify their own market research. If you want to have licensed appraiser for your property, they can provide a reliable real estate value.

Assessing Income Property Value

Additionally, investors who are buying rental properties can value the price based on income. In this case, the property itself represents a business. Similarly, you should perform due diligence to determine if the property is in profit vs revenue and has consistent income. You should subtract costs for repairs, insurance, maintenance and administrative costs. Furthermore, you should consider the value if any tenants leave or leases expire. Based on the total net income of the property, you can calculate the real estate property for investment purposes.

Re-Assess The Real Estate Value

Lastly, you should regularly reassess any properties that have been on the market for a long time. Regularly, real estate markets and properties change. More so, the cost of living can change in an area. We have seen this with real estate in Manhattan or apartments in Brooklyn. Either the area heats up with lots of sales, or the prices drop due to a surplus of houses in the market. In both cases, you should reassess the current value of the house and look at the real estate trends to get a fair value. When purchasing investment properties, you need to have a current price to get a good deal.

To make a good real estate investment, calculate property value carefully. While you can look up the assessed value by local county governments, you still need to get a fair market value. You can do this with your own comparative analysis or a professional’s appraised value. Or, if the property generates income, you can determine the real estate value based on profitability. Remember to keep your valuations current and reassess as the market changes. Following these tips, you will be able to assess real estate value for investments.

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