subject: Value A Real Estate Investment Property [print this page] Real estate investment comprises any deals, like sales, purchase, and improvement
done on the existing property. The most crucial factor to be considered is the property valuation in which the money has been invested.
The investors in the property are it land, commercial or residential property should draw accurate results of the property value. Worth of property may be not well determined which leads to loss deals to the investors.
The property valuer needs to be an astute in determining the true worth of the real estate property. In case a investor has invested in a land property and later has undergone a construction of the house or a commercial plot, then definitely one should prudently the cost of total expenses and other expenditure done on the property in case the investor wants to further sale the property.
The maintenance of the property also can be ignored. The property valuation highly depends on the maintenance of the property done. Usually the property can be measured through methods adopted. Discounting future net operating income and discounted cash flow. the net operating income
The net operating income incorporates the income the property will generate, but only after factoring the operating cost and removing the taxes and interests payments. The operating expense involves the management fees, maintenance fees, property insurance and many other expenses as such.
The property valuer should bring in the total amount gained from investment. The market research is indispensible in this domain. the investor can crucially carry out in-depth research of similar property in nearby areas to draw a clear picture of how much rent can be fetched from the property. Also the property valuation is sans of depreciation. The property valuation should have the interest rate, add on the liquidity premium to it, recapture and risk premium.
The land valuation has to done carefully. Mostly the valuers are lacking the knowledge of the lands worth which can be well extracted from experts. The other method which can be adopted is the gross income multiplier, which is a relative valuation based on the principle that the properties in particular area will be valued proportionally to the gross income which they produce. The gross income is the total income less of other operating expenses borne. Also the vacancy rates must be forecasted to determine the accurate gross income estimates.
Various methods are adopted to calculate the real estate investment property, the valuer is not having accurate knowledge can contact the markets experts in the domain.
