It can be tricky to figure out what the actual value of a property is if you’re new to real estate. There are many factors to consider. As you acquire more experience, you will have a stronger sense for whether a property is worth purchasing or not. There are a few critical pieces to a good property.
Underwriting Of The Deal
Putting a solid financial model together for the property will give you the insight you need to determine how the property is operating in its current state and what the future potential may be. Whenever our organization comes across a new deal, and it’s well located, we go straight to the underwriting to review the performance.
Visual Inspections (Interiors & Exteriors Of The Property)
As the numbers are being put together, we also consider the current condition of the property. We analyze the floor plans to see how the units are set up, and assess what can be improved in all of the units? It’s also important to review the curb appeal and exterior of the buildings to see how well capital expenditures have been kept up on and whether or not the property has been kept up or neglected.
Location = Value Of The Property
All these things are important; however, you also need to look at the location as well. Not every location is great. You have to have more of a futuristic outlook. What’s the place going to look like in 10 or 15 years? You have to think about what the market is doing in that location.
- Are people migrating to the area?
- Are rents growing?
- Is there redevelopment going on?
- Are home values increasing?
- Are property values increasing?
These are all things that you have to consider when you’re looking at a property and establishing a price. You don’t want to go into a property, overpay for it and have the market never catch up to that price point. You have to really do your homework and get into the marketplace and see what’s growing in the area.
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