Accurately Estimate a Property ’s Current Market Value
I recommend that you use my eight-step approach to estimate a potential option property’s current market value: Step 1: Log on to your county’s property appraiser or assessor ’s web site to obtain the tax-assessed value of the property under consideration for purchase. Step 2: Search your county’s property tax rolls for recent sales of [...]
To calculate how much equity an owner has in a property, you must first know the unpaid principal loan balance. However, the only way to verify the balance Soffit, fascia, gutters and downspouts $ Roofs, flashing and vents $ Lawn, shrubs and plants $ Parking areas and walkways $ Fences and walls $ Exterior door [...]
To get an accurate estimate of a potential option property’s current market value, you must deduct the total cost necessary to fix up the property in order to maximize its curb appeal and resale value. The best way to do this is to use the information that you gathered about the property’s physical condition during [...]
The replacement cost method of estimating a property’s value is based on the cost of replacing the improvements on the property minus the cost of the land to estimate a property’s value. Replacement costs are calculated on a per square foot basis by dividing the total number of square feet in the building by the [...]
To avoid being swindled by lying owners who overstate their property’s rental income, you must always reconcile the rental rates listed on the rent roll against the rental rates stated in the rental agreements. For example, I once had an owner who claimed on the rent roll that the gross rental income for a six-unit [...]
Do not allow yourself to be bamboozled by unscrupulous property owners using bogus federal income tax returns to back up their creative bookkeeping. Insist that all annual income and expense statements be supported by federal tax returns. You need to have this information so that you can verify that what you are being told jibes [...]
To be successful in this business, you must be willing to delve beyond the numbers that are posted on monthly income and expense statements when estimating the current market value of rental properties. A word to the wise: When you read a property’s income and expense statement, you should always go under the assumption that [...]
To calculate the GRM, divide the estimated value of the property by its annual effective gross rental income. I prefer using an annual GRM instead of the monthly version. Effective gross rental income refers to the actual rental income that was collected with the vacancy and credit loss factored in, and not the potential gross [...]
To calculate the capitalization rate or cap rate, you would divide the property’s annual net operating income by its estimated value. For example, a property with an annual net operating income of $36,000 and an estimated value of $360,000 would have a cap rate of 10 percent ($36,000 ÷ $360,000 = 10). In most markets, [...]
The income method is used to estimate the value of an income-producing property, based on the net income the property produces. Under the income method, value is calculated using a: 1. Capitalization rate: The capitalization rate, or cap rate, is calculated by dividing a property’s annual net operating income by its purchase price. 2. Gross [...]
Comparable sale and income data for all types of commercial properties are readily available online for free or for a relatively small fee at the following web sites: CoStar Exchange: www.costar.com Loopnet: www.loopnet.com National Real Estate Index: www.realestateindex.com IDM Corporation: www.idmdata-now.com DataQuick: www.dataquick.com Apartment Comparable Sales: www.apartmentcomps.com Real Estate Information Source: www.reis.com
Comparable sales data for residential property are available online at the follow-ing web sites: DataQuick: www.dataquick.com HomeGain: www.homegain.com REAL-COMP: www.real-comp.com HomeRadar: www.homeradar.com Domania Home Price Check: www.domania.com
The comparison sales method of estimating a property’s value is based on the recent sale prices of properties within the same area that are comparable in size, amenities, and features. In order to be accurate, sale price adjustments must be made for comparable properties that have been sold at unrealistically low prices or on overly [...]
The three common methods used by property appraisers to estimate property values are the: 1. Comparison sales method: The comparison sales method bases a property’s value on the recent sale prices of properties within the same area and comparable in size, quality, amenities, and features. 2.Income method:The income method is used to estimate the value [...]
A property appraisal report prepared by a licensed property appraiser is generally de-fined as: “an opinion or estimate of a property ’s value based on a thorough analysis of all the available data that’s been derived from one or all three of the property appraisal valuation methods that are commonly used to appraise property.” To [...]
The difference between a property’s tax-assessed value and its appraised value is as follows: 1. Tax-assessed value is the value established by the local taxing authority for a parcel of land and the improvements placed upon the land for property tax purposes. For example, in Florida, owner-occupied single-family houses are generally assessed at around 70 [...]
The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice defines market value as: “the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the sale price isn’t affected by undue stimulus.” This [...]
For the purpose of this book, I define the term current market value as the value of a property after deducting all of the costs associated with getting the property into a marketable resale condition. To illustrate, a couple of years ago, I bought a one-year option for $3,500 on a vacant, run-down single-family house, [...]