One of the major worries of a majority of property owners and real estate investors is determining the real market value of an asset. Most times, finding out how much homes are truly worth can be difficult. It is recommended that you seek help from the experts at rivercove residences who have the requisite expertise and experience in the real estate market.
Apartment specialists, dissimilar to general estate agents evaluate units based on the current condition and other important factors. They have a good knowledge of the building as well as the potential of your apartment thereby giving you an idea of the value of your home, in terms of what it’s worth and what it’s not.
There are a variety of methods used in the assessment of an apartment’s value. The most common is using a valuation of its value against its size. By doing a division of the sales price by the size in square meters, you can arrive at your property’s value.
While a lot of the computations depend on size, you would have noticed that certain similar properties have a different valuation. Mostly you shouldn’t rely on the sales of similar properties as a way of determining the worth of your apartment. This is due to the fact that the valuer of an apartment uses different factors and considerations in grouping apartments into different categories. Location and size will always play a role in the valuation of apartments.
There are also two other methods that you can follow if you want to calculate the value of any of your real estate properties. You can try and calculate those values based on two widely accepted methods. If you do end up using these methods, then it will be much easier for you to get the true value of your condominium property.
Relative valuation method
The most used method to value real estate is the relative valuation. To calculate the value of a property based on this method, the price of other houses of nearby location and similar characteristics is used as a scale, applying at the end different value correctors relating to the differences that can be found with the condominium that has been compared.
The relative valuation method is the most applied, but it has a big problem, which is that this method does not take into account a possible overvaluation in the prices of the properties that we use in the comparison.
The use of this method to value condominiums led many savers to lose a lot of money when buying houses during the last real estate bubble when they had the wrong idea of their true value.
As you can see, this method can serve to speculate with real estate, but if what we want is to calculate the real intrinsic value of a property we must use the cash flow discount method that I will show you next.
Cash flow of the property valuation method
The most suitable method to calculate the value of a property is the discount of cash flows, which is based on capitalizing the expected return of the property according to the required profitability. To do this, we must take into account both the income and future expenses generated by the property.
The discount rate that we will apply will be the required profitability that we hope to obtain from our investment. The discount rate will be subjective and will depend mainly on 2 factors, these are the investment alternatives that we have and the intrinsic risk of investment in real estate.
You will demand a higher return on our real estate investments when the profitability of the investment alternatives is greater, and vice versa. In the same way, we will demand a greater profitability to houses whose income is less stable or is exposed to greater risks (legal, tax, natural, etc.).
What are some other factors to consider?
Many people think that when it comes to looking for a good condo to buy, the important thing is just their market price. But it is not only this factor that counts: the value of the condominium also has a fundamental role in the purchase decision. The condo will make a difference, anyway, in your monthly budget. However, you need to know exactly what the size of this cash flow will be.
It is necessary to remember that the condominium fee will be paid by the buyer during all the period in which he has the possession of the apartment. Thus, this will always be a fixed expense to be added to the other expenses of the transaction.