Become A Better Real Estate Investor By Developing The Ability To Accurately Appraise A Home’s Value
Have you been thinking about getting into real estate investing? If you’re serious about becoming a real estate investor, one thing you really need to develop is the ability to appraise a home’s value. If all you’ve bought before is a car, and you’re used to seeing a NADA value placed in a book like you get with car dealers, forget it. There are no values placed on a home for sale apart from the one you work out for yourself. This is why it’s often best to stick to one or two areas for your real estate investing, at least initially. Doing this makes it easier for you to get a ‘feel’ for what a house is worth, based on other comparable houses that have recently sold in the area.
So if you want to develop your appraisal skills, here a few ideas to get you started. Firstly, decide what appraisal method you plan to use and stick with it. Many people appraise a house based on the value of similar houses in the area. In that case, you better make sure you get to know the area inside out and know exactly what sort of numbers you’re dealing with.
Another method of appraisal is to look at the potential income of the property. In that case, you need to consider all the factors involved, including the potential for vacancy, required maintenance and how attractive the house appears to a potential renter. If you want to appraise the house based on its potential value after you’ve carried out improvements, then make sure you have a very good idea of what those improvements are going to cost you in both time and money. Don’t just guess; have real, solid numbers to work with. Otherwise you could find yourself pouring a lot of money into the house without the prospect of recouping that with a profitable sale.
You also need to know the type of value you are going to use in getting an appraisal. You need to learn the difference between tax assessed value and appraised value. The different rules and laws in your state will determine the tax-assessed value of a property, and it’s based on information such as the value of the land and the level of improvements made to that land. An appraised value is basically an estimate of the probably sale price of the property if it was sold on the open market today. This is basically along the lines of the NADA value you see when you go to a local car dealer. It’s determined from comparison sales, which means it’s based on the sale price of other similar houses that have recently been sold in the neighborhood.
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