Although investing in real estate in Columbia, TN is worth it, you need to know it isn’t something you can just rush into. For you to maximize profit and achieve the best results, you certainly need to factor in different things, including property valuation. In simple terms, valuation is crucial for you to understand the exact worth of the property you’re looking to invest in.
As an investor, you certainly need to understand exactly how property valuation works. This will help you when making smart guesses regarding how much you’ll likely make in profit when you invest in a certain property.
- Should you work with a realtor in Columbia, TN when valuing a property?
- What are the different approaches for property valuation?
You’ll find all you should know about these questions as you continue reading this property valuation-related blog.
Should you work with a realtor when doing property valuation?
Hiring a realtor in Columbia, TN comes with tons of benefits, especially when it comes to buying a property. Apart from helping you to find the best location, based on your budget, a real estate agent, such as Rochelle Romines, can also assist you with property valuation.
With Team Romines, you can always get an instant, correct home valuation of any property you’re looking to purchase in Columbia, Tennessee. All you need is to provide information, such as address and unit, regarding the property of your choice.
What exactly goes into property valuation?
A lot of things go into property valuation and if you want to get the best results, you need to consider all factors. These factors include location, condition & size of the property, economic factor, market conditions. That said, below are a few effective approaches for valuing a property today:
1. Sales comparison
One effective method of valuing a property when investing in real estate in Columbia, TN, is by using the sales comparison approach. This approach involves comparing the value of recently sold properties with the one you’re looking to buy.
The sales comparison approach of property valuation is mostly suitable for residential real estate investment. It’s pretty simple; for you to use this approach, you need at least three properties that recently (at most 6 months) sold in the location of the property (at most 1 mile distance) you want to buy. After that, sales comparison is performed based on different factors, such as the sales conditions, physical properties, and rights.
2. Cost approach
The cost approach of valuing a property when investing in real estate in Columbia, Tennessee often puts different factors into consideration.
- To use this approach, the current value of the land is first estimated.
- The current cost that goes into the construction of the building is also estimated appropriately.
- Furthermore, the valuer needs to factor in the depreciation value of the property based on its current condition.
- To get the property valuation, the value of land is added to the current cost of constructing the building including its improvements. Next, subtract the depreciation value from the value you get.
3. Income capitalization
Income capitalization approach is an effective method of identifying the worth of a property, especially when investing in commercial real estate in Columbia, TN.
Income capitalization based on the general rule that sales the value of a property is directly related to the amount of money it generates. To use this income cap approach, you need to:
- Estimate the potential gross income of the property. For effective results, you need to remove the value of vacancy from the estimated potential gross income.
- Next, you need to estimate the annual net operating income (NOI)
- Estimate the capitalization rate or rate of return paid based on the income earned on the property. You can achieve this figure by dividing the NOI by the sales value of recently sold properties.
- Lastly, divide the NOI of the property you’re valuing by the above cap rate to get the final value.
Property valuation is a complex process and for you to achieve the best results, you certainly need a reliable realtor in Columbia, Tennessee – such as Rochelle Romines. This real estate agent will work with you and use the best approach to get the exact value of the property.
