4 Ways to Value Your Property

When investing in anything, you have to ask yourself loads of different questions before pursuing it. After all, you’re using your hard-earned money on something you expect will make you a profit!

This is the same when investing in property. Knowing the value of the investment property that you’re going to purchase is crucial. The rental game, in particular, is currently at an all-time high when it comes to income!

Before you hop into the real estate rental scene, you’re going to need to learn how to value your property. Here are four ways in which you can do just that!


Sales Comparison Approach (SCA)

This is the approach that you probably recognized as the most widespread form of valuing residential real estate. This is even used by appraisers and real estate agents whenever they need to evaluate properties!

It’s about as easy as it sounds. All it takes is a quick comparison between similar homes that have been sold or rented before locally over a specific time frame. The SCA heavily relies on characteristics such as the number of rooms, garages, driveways, pools, etc., to determine the property’s value.

The most common way to find the rental property’s value through this method is by price per square foot if a 3000 square foot, something similar to that should be expected to be priced similarly as well!


Capital Asset Pricing Model (CAPM)

This method is a lot more comprehensive than the previous. It fixates on the concept of opportunity cost and risk and applies it to investing in real estate.

The potential RIO or return on investment from the rental income is crucial in this model compared to other assets with little to no risk. To shorten it up, it means that if the investment placed on the rental income exceeds the potential RIO, it isn’t worth buying.


Income approach

For the income approach, it relies on calculating the annual capitalization rate for an investment. Though you could use a rental yield calculator to conclude, a better way to calculate the quality is by dividing the rent’s annual income by the current property’s value!

Assuming that a market building costs $120,000 to buy and the expected monthly income from the rentals is $1,200, then the expected annual capitalization rate is 14,400 or 12%.


Cost Approach

The cost approach states that the value of the real estate being sold is only worth what it can be used for. If you’re a hotel developer looking for three acres of land in an area so you can convert them into hotels, the value of your land will be based on the best use of the land itself.

If oil fields surround the land you purchased for the use of turning it into a hotel, the best use of the land is for drilling to look for more oil!

Knowing which method to use to value property can be difficult. However, there are loads of different videos and platforms that can help make that process easier. One of them is the Rethink Investing podcast that gives in-depth knowledge on anything under the radar of property!

6 Things to Consider Before Buying a Lot

Building your home is an excellent milestone for anyone. Imagine being able to put together your vision of what your dream would look like. Isn’t that exciting?

But let’s not get ahead of ourselves. Before we even consider the interior and exterior of our dream house, the first thing we need to consider is choosing the right lot where we will build our dream house.

The property lot you choose will make or break the deal. Your dream house must be built of a lot that will give justice to your life’s work. So, we’re giving you some tips on how to know that the lot you are eyeing to purchase is the one.


1. Visit your potential property in person.

It is highly advised that you do a site visit in person. After all, this is where you will build your home, and this is a crucial decision to make. This will allow you to get a feel of the property. You can see the different vantage points from different areas of the lot. You can meet future neighbours, and you will have an idea of what your neighbourhood will be like. This will help you decide whether the place is a match to your references.


2. Bring a “second set of unbiased eyes” during your site visit.

You might get all too excited when you see the lot where you will build your dream home. Don’t let emotions get in the way. It would be best to bring along experts like a civil engineer, design professional or land for sale officer. With their expertise, they will be able to pinpoint soil erosion or other microclimate conditions that will significantly affect your home in the long run.


3. Visit the Local Building Department Office 

Do a little research about the property you are considering to buy. The Local Building Department has a wealth of information when it comes to historical data, current geography, ongoing constructions and plans for the area surrounding your property. This is important because this will give you some insight of what the property is in the past and what it will in the future.


4. Experience your properties at different times

To give you a more holistic feel of your potential property, it is best to experience it at different times and if possible, in different seasons. If you’re doing a couple of site visits, try to do it at different times of the day – morning, midday and the evening.


5. Weigh the Pros and Cons

If you are choosing between different properties, weigh in the pros and cons. This will help you make a more logical decision in which location would be the best home to your future home.


6. Consider your lifestyle

Your lifestyle is another major factor to consider. Do you have small children? Do you prefer a quiet neighbourhood, or do you want a bustling one? Do you prefer to stay indoors or outdoors? These are things you have to ask yourself too in choosing the right property lot.


To know more about available lots in Hillstowe, get in touch with the experts and check the available options!

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