House Cleaning Worksheet
How to evaluate and determine the value of a property with precision!
As a certified appraiser, I can say that the most common mistake that real estate investors beginning, many real do is they pay too much for goods. The fact is too expensive for property is often cited as the main reason why so many newcomers fail to make the most profitable real estate investors. This is because most of the top real estate investors are woefully under-capitalized, and they lack the deep pockets necessary to subsidize their property investment unaffordable.
For many investors, novice, pay too much for their first investment property usually proves be a very costly mistake and deadly, and marks the beginning of the end of their foray into real estate. Therefore it is imperative that you learn to accurately estimate the current market value of property investment potential! In my case, it is the most important aspect of any the real estate investment company!
A quick profit of $ 50,000 for the value of a condemned house
Once I bought a real estate option on a dirty, neglected, dilapidated, but the house a solid structure in a transitional neighborhood in Los Angeles California, which had been condemned for construction, safety, health and fire code violations. This place looked like a something nice about the center of Baghdad, Iraq! He had what inspectors code execution commonly known as the accumulation of all sorts of debris, garbage and junk known to mankind! The owner of the establishment has lived in Westerville, Ohio, and wanted the steady stream of letters threats of the Winter Park Code Board Enforcement to stop.
I had done my homework, and he knew the property was worth at least $ 450,000 after being cleaned. I ended up paying $ 2,500 for a six-month option to buy the house of $ 365,000. It cost $ 10,000 I have all the accumulations removed from the property, and the house, entrance and walkways pressure washed. Three weeks later, I sold my agreement real estate option for a $ 65,000 profit! This would never have happened if I had any idea how to price properties. Since I had an accurate estimate of how much the property was worth in its current state, I was able to negotiate a purchase price below the market which was based on the property dirty, neglected, dilapidated condition non-negotiable, and not on how it would in height after being cleaned.
No Kelly Blue Book for real estate investors looking for property values
Unfortunately there is no Kelly Blue Book equivalent for real estate investors use research in real estate prices, then you'll have to learn by yourself how to estimate the current market value of the property investment potential. However, thanks to computers and the Internet, in Most real estate markets is not so difficult to get a rough estimate of the value of a property's current market. This is particularly true for real estate investors located in counties where all property rights, sales and tax records are available online.
The definition of market value
Uniform standards for evaluating the Foundation professional practice assessment, defines market value as follows: "The most probable price a property should bring in a competitive and open market under all conditions necessary for a fair sale, the buyer and seller acting prudently and knowingly, and assuming that the sale price is not affected by undue stimulus. "
The difference between the appraised value and assessed value
The difference between the tax-assessed property of and its estimated value is as follows:
1. Tax assessed value: the tax-assessed value is the value established by the authority local taxing for a parcel of land and improvements placed on land for property tax. For example, in Florida, occupied by their owners single-family homes are usually valued at about seventy percent of their fair market value by county property appraisers.
2. Estimated value: the estimated value is the estimated value given to a property by an object of the license evaluator using methods Assessment accepted for the type of property being appraised. For example, the method of evaluation agreed to estimate accurately the fair market value for an owner-occupier single family home is the sales comparison method where the value of a property is based on the recent sales of comparable properties in the same area.
The three common methods used to estimate property values
Three methods The most commonly used by property appraisers to estimate property values are as follows:
1. Sales Comparison Method: The sales comparison method bases a property value on recent sales prices of properties that are in the same area and of comparable size, quality, equipment and features.
2. Income Method: The income method is used to estimate the value of a good producer income based on net proceeds of the property.
3. Replacement Cost Method: The replacement cost method is based on it would cost to replace the improvements on the property, using building materials and methods similar construction.
The sales comparison method to estimate the value of a property
The sales comparison method to estimate the value of a property is based on recent sales prices of properties in the same area that are comparable in size, equipment and features. In order to be precise, the sales price adjustments must be made to comparable properties which were sold at prices too low or too much on financial conditions are not readily available to the public purchase.
The income approach to estimate the value of a property
The income method is used to estimate the value of an income producing property based on net income the property produces. Under value method of income is calculated using:
1. Capitalization rate. The capitalization rate, or capitalization rate, is calculated by dividing property income net annual operating its purchase price.
2. Multiply gross rent. The gross rent multiplier, or GRM, is calculated by dividing the purchase price of the property gross monthly income of operation.
Beware of owners using fuzzy math
A word, hello: when you read a property's income and expenses, you should always go in the event the owner is probably the practice fuzzy math by fudging the numbers, and say little white is to back up. In addition, the use of monthly income and Analysis of expenditure worksheet as the sample below, to check against all that is listed on the income of a property and expenditures to reconcile the statement with receipts and tax returns against what is shown on:
1. Schedule E (Supplemental Income and loss) the last owner federal income tax return.
2. The latest property tax annual income and expenditure the case to the county property appraiser or assessor's office.
3. All leases for the year elapsed.
4. The bills for water, wastewater, solid waste, gas and electricity for the past year.
5. Repair and capital improvement bills for the past year.
Method replacement cost of estimating the value of a property
The replacement cost method to estimate the value of a property is based on the replacement cost of improvements on the property, less the cost of land to estimate the value of a property. Costs alternatives are calculated on a per square foot by dividing the total number of square feet in the building by the square foot cost of construction. For example, storage of two thousand square meters of commodity off that cost 375,000 dollars to build would have a replacement cost of $ 187.50 per square foot, $ 375,000 divided by 2000.
How to obtain estimates of replacement cost free construction
You can usually get an estimate of construction without replacement cost by calling a local independent insurance broker who represents insurers that specialize in providing property and casualty insurance coverage for residential and commercial. When you call a broker, tell them you want an estimate of the cost replacement. replacement property costs are calculated using a formula that the replacement cost based on the geographical location of the property and:
4. Number of stories.
5. Roof type.
6. Use present.
7. Heating and cooling.
8. Size in square feet.
Use the eight steps approach to estimate the value of a property Current market
Use the following eight steps in the worksheet and the current value on the next page to get a rough estimate a potential investment property current market value:
Step # 1: Connect to your property appraiser for the county or Website of the evaluator to obtain payment of the tax value of the property under consideration.
Step # 2: rolls Search property tax in your county for recent sales of three to five properties that are comparable in size, equipment and characteristics, and two miles from the property under consideration.
Step # 3: Carefully analyze comparable properties that you find, and make adjustments in selling prices of differences in equipment, special features and physical condition of the property.
Step # 4: verify the income and expenditure that are listed on the income and expenditure statement of the property under consideration.
Step # 5: Analyze the property income and expenses for the twelve months to assess its potential net operating income.
Step 6: Calculate the capitalization rate of property by dividing the operating profit potential of the estimated amount that you derived from the analysis of recent sales of comparable properties in step number three.
Step # 7: Estimated Property value by multiplying its net operating income by the capitalization rate you came with the property.
Step # 8: Calculate the cost replacement of improvements on property using similar construction materials and construction method.