subject: Investment Property and the Determination of Value [print this page] Investment Property and the Determination of Value
If you are an investor looking for commercial or residential rental property, now is the time to buy. The market value of investment properties is very low and will increase in the future when the economy returns to normal. With the right information, you can find some great deals offering a good rental history at a great price. By investing now, you will buy properties at half the value of what they will be in ten years. As long as you keep a professional building and the rentals are full, your income will increase over time which will ultimately lead to the creation of long term wealth.First, it is important to know the current value of the property before you invest. There are a number of ways to do this, even if you are a first time investor. Do not over pay on a property based on a value from 10 years prior. It is important to choose the right rental price to keep offices and apartments full. If your rental prices are too high, you may be left with empty spaces that will cost you at the end of the year and make your property worthless to you as an investor. Start by choosing the property you would like to consider. Ask for listings within the same general area. Take into consideration the number of spaces available for rent, the condition of each building and parking space available. In order to keep space rented, parking is a major consideration for any client you would like to have in your building. Also, check if the building is in good shape or if you are going to have to make a large investment to bring it up to appropriate codes and standards. Next, check the local newspaper, online listings, and other sources for prices in the area. You could also check properties in nearby areas for a more well rounded analysis. Do a comparison before you make an investment to be sure you are getting the best fair value price on the property. You are in the business of making money, not supporting others. Study the rental area to analyze the presence of section 8 housing, student housing, or if there will be single family or professionals using your building. This makes a difference in what you can ask for the property and the type of clients you will surround each other's spaces with. You do not want to mix student rentals with business clients trying to make an income. Always keep commercial and private rental spaces separate from each other. Are you going to be renting to a higher income level or to first time and beginning renters? Consider the type of rent you can get from each. One of the best ways an investor can calculate the value of a property is to use the GMR ratio. It is fairly simple and real estate agents and appraisers are usually willing to help you through the process in order to assure you of the best price for the quality of the property. The easiest way is to take the gross annual receipts for the rental property for the year and the listed selling price and divide one into the other. This will give you the GMR ( gross rent multiplier ). You can also use it in reverse with other properties in the area to see if you are getting the best price available.
