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how to determine the real value of a property...

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  • how to determine the real value of a property...

    In the short-term, think about how much rent you would get for your property.
    Divide the annual rent - expenses/year by the property price + taxes + fees + additional investments that might be needed.

    Then compare this with the yield of a savings account.

    This should be better then a savings account - the yield should be ok even without rising property prices - and in the worst case also be quite ok even if the property prices go down slightly.

    In the long-term.

    In the long-term energy costs will rise and the UK will get colder due to climate change. The higher the bills for heating etc.. the less people will be able to afford for a rent or other expenses. Therefore an enery-efficient building will have a big advantage.

    Right now, the UK does not have any reasonable energy-efficient buildings.

    While in Germany for example many people build "passive" houses without any heating costs or even active houses - houses that produce more energy then they consume, this does not happen in the UK yet.

    Inefficient heating systems are still most common in the UK - and many houses still have badly insulated roofs, walls or windows with a bad enery-efficient.

    So in the very-long term try to buy something not too expensive - that you can knock down in 10 years and build something at the latest building standards. Or buy something that is possible to be converted to an energy.efficient building. Most buildings are more expensive to be modernized then built new.

    Knocking down a house costs around 3-5,000 pounds. Building a new house around 50-75,000 pounds depending on the size if a building company is not involved - or even less. Biggest problem in the UK is finding building land - so the best option is to build a run-down, dilapidated house and knock it down.

    But back to the subject: In the long-term the rent should pay the property within 15 years.

  • #2
    Re: how to determine the real value of a property...

    Location is extremely important when you're comparing sold properties. A professional appraiser typically looks at houses within a one-mile radius or less, and so should you. In the case of a subdivision, where the houses are all similar and built in the same time period, you need to compare similar houses with similar styles in the same subdivision to get an accurate valuation. If there's a wide mix of properties in the subdivision, you may need to go outside of it to get comparable sales. Just be careful with "dividing lines." Geographic lines such as opposite sides of the river, the park, or a main highway can be invisible dividing lines that put the property in another school district and may not garner equitable comps.

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    • #3
      Re: how to determine the real value of a property...

      Fifteen years?
      I'm currently in the process of buying a 2800 square foot, five bedroom, two bathroom home in the american midwest. I'm familiar with the area as I own a rental home just one block away. I'm paying $35,000 for it. This includes $approximately $20,000 of rehab (refurbishment). My legal fees or closing costs will be $288 and a charge of £80 for a notary public.

      It will be rented to a Section 8 tenant under the US HUD scheme at $900 to $950 per month. My other property close by is a three bed, two bath detached home which currently rents for $800 per month, so potentially the new one could rent for $1000 to $1100, I have seen this happen, but we work to the worse case scenario which is $900 per month.

      Once appraised the property will be valued somewhere in the region of $60,000 if sold to a retail buyer. However these are few and far between in the US now, with cash buying investors buying most properties. Therefore allowing $90 for property management, $40 for property taxes and $35 for building insurance it will produce a cap rate of over 25%.

      Of course there are a few fees, setting the property up with a management company, finding a tenant, paying annual Section 8 inspection fees, and you will have to allow for some maintenance fees and void periods while you await a new tenant. But this property should pay for itself in 5 years. It sold back in 2005 for $70,000 so there is the potential for capital appreciation too. And CGT is way lower in the US than it here in the UK.

      Why bother buying BTL's in the UK is what I ask?

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      • #4
        Re: how to determine the real value of a property...

        Most important factor is always the place and facilities available nearby places like market, school, transports etc. Where all these facilities are easily available there prices will be automatically high. So we always find more expensive property prices with in the city.

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        • #5
          Re: how to determine the real value of a property...

          Location matters a lot and then obviously the condition of particular property.

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          • #6
            Re: how to determine the real value of a property...

            Obviously, you'll need to look at many other aspects before you can determine the exact value of a property, You should be able to look at comparable sales involving properties with these factors and get a good idea of the value of the property.

            The big three...
            1. Location
            2. Size
            3. Bedrooms & bathrooms

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            • #7
              Re: how to determine the real value of a property...

              Even after taking all your costs out of the rent a banks interest rate won't beat it. Yes electricity ect... is on the up but we do have inflation and as long as it's under control property will always be the victor when it comes down to either renting or saving.

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