subject: Analyzing Investment Property Value [print this page] Analyzing Investment Property Value Analyzing Investment Property Value
Rental properties are among the best investment options available to investors at about every income level imaginable. Rental properties bring in monthly revenue, and can be managed fairly easily. This, combined with the power of appreciation, leverage, and tax deductibility, makes real estate the ideal investment.One of the most important things any investor must do in the course of his business is determine the actual value of any property considered for purchase. There are certain things that every investor should look into before purchasing a property in order to make sure they are truly getting a solid investment.THE PROPERTY ITSELFFirst and foremost is to run the numbers. Add up the monthly rent and subtract the monthly expenses such as the mortgage, property taxes, insurance, sewer, etc. If you have a profit after deducting all the expenses, the property in question can be put on the proverbial short list. You will also want to look at other similar houses for sale in the area to make sure you are getting a fair price. Another critical task is to coordinate the property inspection. The idea is to hire a licensed inspector to make sure the property does not have any hidden problems. These people are trained to look for warning signs and damaged areas of the building. They will be able to tell you whether there are any major structural problems with the property that will affect its value. This is critical because you do not want to get stuck with a structurally questionable property.You will also want to factor in the amenities available in the property. Things like appliances, landscaping, extra closets, a nice yard, a garage, etc., will all improve the perceived value of the property. Tallying up the value of these amenities, along with your analysis of the numbers and the property inspection, should provide everything you need to know about the property itself to make an informed decision.ATTRACTIVENESS OF THE NEIGHBORHOODAnother factor that impacts value is the neighborhood in which the property is located. No person wants to move into a neighborhood with a high crime rate. Same with properties located near railroad tracks or busy streets. It is always smart to take these types of annoyances and statistics into consideration when determining a property's true value.Another way to evaluate the desirability of a neighborhood is to analyze the amount of jobs available in the area. If there are a lot of jobs, the area will be stable and will have enough renters to keep you afloat. Most people don't want to live far away from where they work, so they will be willing to pay more money each month to live somewhere more convenient. If the rental property is located near a lot of important sectors and business areas, then the value of that property will usually be much higher than it would otherwise.BOTTOM LINEDetermining the value of an investment property is easy if you know what to look for. Obviously any property considered for purchase must be fairly priced, and be able to cover the monthly expenses. Beyond that, make sure the property is structurally sound and the neighborhood is desirable, and you will be well on your way to determining true value.
