How real estate properties valued
Real estate is a now become a business where you can get lo of profit. All kind of properties are now investing with a good percentage of profit. Day by day this business field is growing and new techniques are adopting for a high investment and profit ratio. Still the field is of totally risk and challenges. Without proper understanding and research, no one can have a success history in real estate. Your investment has its own worth and be careful before using it.
So this is very important for you to know how the properties under the real estate is valued and what are the constraints or the key points that is to be noted before you start your real estate business. Otherwise you will invest on any property and may fail to pass these constraints when it comes under resale.
Location and the population near your property will be taken into account while it comes under the resale stage. Hence while your investment makes sure that the property is in a very good location and has sufficient facilities like hospitals, schools, colleges, markets etc. You should make sure that these are accessible in a limited time with good transporting modes.
Using Sales Comparison Approach, a property can be valued. It’s a simple method by comparing similar homes or properties rented or sold over a given time period. The SCA over a given time period will help the investors to understand the emerging trend.
Another comprehensive tool for real estate valuation is the Capital Assert Pricing Model (CAPM). Here the risk and opportunity cost is applied in real estate valuation. How this works? It will find out the ROI (Return on Investment) from the rental incomes and will compare with other risk free investments. CPAM will help you to see the risk when you invest on a particular property.
Real estate properties can be valued using Income Approach. This method focus on what annual rental income can be received on while investing on the property. This method is frequently used for commercial property estimations as such properties will be leased/ rented. This method is determining the annual capitalisation rate over the investment.
Another argument that can be used for the property valuation is zoning. Each property will be under any zone and depending on these zones the value can be estimated for the real estate investment.
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