Valuing Property Has Many Methods and You Could Combine or Stick to One
Did you know that you can sell your property using more than one way? There are several valuation methods you can use to analyse the property value appropriately. After which, you can easily define a price for the property intended for sale. You may end up hiring professional help for this service. But, if you make an effort to know how they do it, you could end up getting a real good deal. Here is the explanation of each property valuation methods people commonly use to get a price estimate.
Property Valuation Method One: Comparison
The easiest way for anyone to begin selling a property is to look nearby. This is the basis of getting an estimated value of a property. If you know of a residential or commercial property nearby up for sale, you can look it up and see for yourself if it is similar to yours. You can generally use this method as long as a transaction is frequent in the market. Take the time to study several properties with its enlisted pricing, depending on the size, location or improvements and make adjustments suitable to your property for sale.
Property Valuation Method Two: Profit
The next standard method is called the profit method. Brokers would use this method when there is no similar property to compare with. A property that is a monopoly in nature gets a price estimate through this method. The likes of pubs, recreational parks, nursing homes, are not typical and few in between. Brokers can get an estimated figure by obtaining the gross profit of the business and deducting all working expenses. Working expenses does not include rental payments. The end figure can be divided between the tenant for running the company and the landlord for rent.
Property Valuation Method Three: Investment
This method is to calculate the property’s potential to generate future income. Brokers use this method on freehold and leasehold property. Usually, the property already has a tenant. It provides the landlord with a return of investment (ROI) in the form of rental yield. People buying properties expect to get a good investment. More so, if the property is tenanted. The investment method analyses comparable sales transactions as well as future rental income to get a net present value. The net current value is what the building is currently worth.
Property Valuation Method Four: Residual
Some properties go through this method such as vacant lands and abandoned properties with potential for development. The residual method provides an estimated value of the property by calculating a current gross development value (GDV). The equation also requires a combined cost of construction, fees and developer’s profit. Interested parties can purchase the land, site or property when you get a figure after deducting the combined cost from the current GDV. This way, striving property developers can get a better idea of whether the property they want is a good investment or otherwise.
Property Valuation Method Five: Costing
The last standard method is the contractor’s calculation. It is a costing method. It is used only when the property has no comparable, not a monopoly, and non-typical. It applies to buildings that were not initially intended for its use, becoming commercially available. The price of these buildings includes the cost of construction and the cost of the land it sits on. This method is rarely reliable as it can go change over time.
