Investors commonly purchase residential properties to use as rental homes to turn a profit. It is not uncommon for an investor to own a couple homes in their local area or perhaps several homes across several cities. When investing in a home, it is important to know how to determine the market value. You want to ensure the home you are considering purchasing will be worth the amount paid. Read on below to find out the top four accurate ways to determine market value of a potential residential property.
Understanding the Term Market Value
To begin, you must understand the term market value. Market value is the amount in which the home would sell for under normal conditions. The price point is what the home would bring, not including if a home was being sold under stressful conditions or bought in such a manner. Divorce, death of the home owner or a career change can lead to a home selling at above or below market value. There are four main factors to consider when trying to determine the market value of a home. External characteristics, internal characteristics, supply & demand as well as location.
This category consists of the exterior of the home. The exterior should be in good condition with curb appeal, the lot size considered, the architectural style considered, type of roadway, driveway, etc.
The interior of the home should also be considered. The size of the home, including square footage and the number of rooms is heavily considered. The quality of construction along with the appliance condition plus heating type, energy efficiency of the home and more should all be considered. These factors should also be considered for renting potential, by you the investor. A property management company will quickly tell you that the better condition the interior of the home, the less work needed to find renters.
Supply & Demand
This category simply takes a look at the number of homes for sale in the areas as well as the buyers on the market. Do the homes in the area sell quickly? The price point of similar homes will play heavily in to what the suggested market value should be along with how much similar homes sold for in the neighborhood.
The location of the home also plays a part in market value. Being near schools, in a neighborhood or in a downtown area can bring about a higher market value depending on the area. Residential property management companies in Waterloo suggest considering your target rental audience when investing in a home. If you are looking for long-term renters, it might be better to go with a home that is near a school to appeal to families.
These are the four main factors when taking into consideration the market value of a home. Be sure to look at these factors when trying to determine if a home you are interested in has been priced at a good value.
To learn more about market value and rental property management, contact Latitude Properties Limited today.