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Property Assessment

How do you determine the value of a property?

Determining the value of a property is a crucial part of buying, selling, and investing in property, so how is the best way to do this? How do you do it?

There are actually many factors to look at when estimating the value of a property. It is both an art and a science. Some, websites have tried boil this down to instant, automated valuation tools. Most of these don’t work very well, or accurately. Zillow is the most notorious example; with the company’s CEO selling his own home for 40% less than the Zestimate, or about $750,000 under the value his own platform provided. If you really want to know what a property is worth you have to dig deeper into the facts about the property, ensure you have the most up to date information, and even factor in why the property is being bought or sold.

The 3 Types of Valuation

There are three main ways of appraising real estate:

  1.     The cost approach
  2.     The income approach
  3.     The comparable sales approach

The cost approach calculates how much it would cost to rebuild a given property today. The income approach is typically used for investment property, and determines value based on the income the real estate can produce. The comparable sales approach is most commonly used for single family residential property, and determining a market value based on the sales of comparable properties.

Factors Considered in Determining Property Value

When it comes to assessing property value, the deeper and more detailed you are, the more accurate your estimates.

First and foremost is location then there are other important considerations to factor in·      

  • Square footage
  • Number of bedrooms
  • Number of bathrooms
  • View
  • Property condition
  • Lot position
  • Community amenities
  • Garages
  • Age of the property
  • Special features like swimming pools
  • Proximity to recently sold properties
  • Terms of a sale (i.e. financing used, seller contributions, repair credits, or Realtor rebates)

Where to Find the Data

There are a number of places to find the above data:

  •       MLS
  •       Appraisers
  •       Real estate brokers
  •       Tax records
  •       Building permits
  •       Driving neighborhoods
  •       Title companies
  •       Home inspections

Clearly there is a lot that goes into determining the value of a property. Still, with as much as there is on the line when buying, selling, and investing in real estate, it is worth being detailed and achieving  due diligence and clearly researching when assessing value of a property.

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Jacob Blackett

Originally from Reno, Nevada, Jacob began his real estate career in 2010 as a sophomore at the University of Nevada, Reno, when he bought and sold his first two residential “fix and flip” properties in Southern California.

In 2014 Jacob founded Holdfolio and by the end of 2019, Holdfolio had amassed a rental portfolio of 141 single-family homes and 412 apartment units. At this time Holdfolio was fully vertically integrated, meaning they were operating every aspect of the investment cycle which included acquisitions, procuring bank loans, raising capital from investors, running a full-service property management company, a licensed construction company, and performing their own asset management.

Fueled by low interest rates and strong rent growth, real estate values increased steadily and dramatically between 2010 and 2020, and by early 2020 Holdfolio could not pay as much as other firms on new acquisitions. Jacob took this as an opportunity to sell all of Holdfolio’s holdings and pivot the business model to see more deal flow and invest with much larger and more experienced firms, which is how Holdfolio operates today.

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Ready to invest in real estate?

We make real estate investing simpler, more transparent, and accessible to individual investors.