Often people fail to make a profit from property investment when they do not understand the true market value of their chosen property, both in terms of resale and rental income.
Investors hoping to purchase a run-down home or off-plan development and sell it on at profit when the work is complete; a practice known as flipping, are often caught out by over-inflated prices or under-estimated renovation costs.
On the other hand, buy-to-let investors can be seduced by suggestions of high rental values and then disappointed when these do not materialize.
Whether you’re planning to flip a property or buying-to-let, it is important to ensure that you do not pay over the odds, as money saved on the purchase price will lower your mortgage costs and increase your profit margin.
Understanding the local market
One of the best ways to estimate the potential value of a property is to understand the local market. Fortunately there are a number of tools to help you do this:
Use the internet. Websites like Zillow give the price the owner paid and other sales around the property. If the property was bought for $100,000 two years ago, chances are it’s worth about 10-15% less today. Don’t pay attention to Zillow’s “zestimate”, but rather the comps. Drive by the comps to see how they compare.
Browse estate agent listings – Using the internet and local papers, you can soon get an idea of the market value for different types of property in the area. It is also worth arranging a couple of viewings, allowing you to make suitable comparisons when you have decided on a place to purchase.
If you are planning to buy-to-let, it is also worthwhile speaking to a few letting agents to try and gauge the general rental prices that could be expected. Again rental listings on the internet and in local papers will help to verify the amounts tenants will be prepared to pay.
Take your time
Unfortunately there is no silver bullet approach to accurately valuing property and one of the secrets to running a profitable property business is investing time and money to ensure your buy your property at the right price.
this is a timely article esp now, when many of us are looking for a deal…