Learning Valuation Of House Or Asset

One of the most important thing to be successful in real estate business is learning valuation of real estate.
There are few important approaches in finding the real value of houses and commercial properties.

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First is market approach which is finding out value of neighborhood prices. At Realtor.com you can see what are the different houses listed in the market for sale. You can compare sale prices of different comparable houses in the same area in the last few months. There are some properties which are not listed on MLS real estate data base of realtors and are sold by individuals privately then you should compare prices with asking prices of those homes also. You must compare prices very close to each other preferably in the same subdivisions. Some time prices can vary from street to street in the same subdivisions.

Timing is very important .In market approach it is very important to see which way real estate prices are going. If in the last few years prices have gone up too much then stay away from buying. Every 10 to 15 years market when it gets overheated then bubble bursts and prices go down for few years and then they stay stable for few years. After staying stable for few years then they start going up and then you can sometime see double digit growth for few years. Ultimately if you average out for long term they go up by 6 to 10 percent a year. People always loose when they buy by emotions and try to speculate in heated market. So it is very important to time the market initially when you are getting into it. If you buy during recession you can buy sometime at 30 to 50 cents a dollar. If you buy right and know how to value the properties then you can make money very fast.

Second way is to find out value by income approach. If property makes you 10% plus return on your investment after paying all your expenses then it has a good possibility that you will make good money with that as rental will keep on going up and price of property will keep on going up. As it has income so it is supporting itself by its rentals. Make it sure rentals are inflated when you bought the property. Compare rents with other comparable properties in the area. See in the near future demand for the property. Make it sure area has good employment and growth in the employment opportunities. Valuation of those areas will always go up.

Third way to know value is to see replacement cost of property. There is always cost of land and construction. So if you are buying something at 50 cents to a dollar just because there is recession and people don’t have money or jobs and you are sitting with etc cash then you will make money when the recession finishes.

Most important thing is only buy when you can steal it. I always try to steal properties not even buy them when they are good deals as I know valuation of properties at a particular time. You can always find good deals even in the sellers market most important thing is you should understand the market and valuations of real estate.

By Ashok of http://becomerichinfiveyears.blogspot.com



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