How to value an investment property

How_to_value_an_investment_property

Think like a property investor, not a homeowner

Let’s look at ways that you can research the market better, and how to value an investment property. I’ll also introduce the importance of doing a due diligence. This strategy is your ultimate aid in how to value an investment property.

Investing in property is different to being a homeowner

If you own your own home, you probably bought it because you fell in love with it. You walked through the door and knew it was the home you’d been searching for. You may even have known this at the garden gate. Unlike investment property homeownership is an emotional thing.

Investing in property is different. An investment property is a box that makes money. You can’t afford to become emotionally attached. This mindset begins at the valuation stage. Just because you love a property, doesn’t mean others will. And just because the comparable valuation shows it is worth x thousand more than the asking price, doesn’t mean it is. Not to you as a property investor.

As a property investor, you have to be sure that you have an accurate valuation. You need to do some donkey work. If you don’t, you could find yourself buying at an inflated price. It could take years to make a return on your investment.

How to value an investment property the easy way

The easy way to assess an investment property takes time, effort, and patience. And a little strategy. Fortunately, there is a lot of research you can do online, including:

  • estate agents have websites that will give you clues to price. Remember that the asking price is rarely the selling price.
  • you should search through the online resource of the land registry. This provides actual sold prices of all homes in the UK. Look for properties similar to your potential investment property deal and in the same location.
  • look through the local authority website. Make sure that infrastructure around your property investment isn’t just planned, but also budgeted. Once the financial commitment has been made, there’s a near guarantee that it will happen.

You should now be happy that the valuation supplied by the surveyor is accurate. But this doesn’t mean it’s real. It’s time to hit the phones. Call local lettings agents and ask about rental prices. Call first as a potential landlord, and second as a potential tenant. Agents will tell you a higher price as a landlord and a lower price as a tenant. The real rental price will be somewhere between these two extremes.

Finally, it’s time for a site visit. Take time to drive round the locality. Look at the local schools, parks, and streets. Visit local estate agents and lettings agents. You want to confirm everything that you have discovered during your online and phone research.

The 89-point due diligence checklist: a valuation structure

The run-of-the-mill property investor lacks the structure to know how to value an investment property. When I first started out, so did I. That’s why I developed an 89-point due diligence checklist. This ensures that I go through every aspect of research needed to ensure that the investment property is what I believe it to be: a box that makes money.

Many investors rely on the sales brochure from a site agent. This is usually a single page of confusing figures. It might include a few pages of photos. Our due diligence checklist runs to 30 pages. Perhaps four of these pages will be photos. This is the level of detail you’ll need to make certain that you make the right buying decision as a property investor and not as a homeowner.

When you’re investing a year’s money on an investment property, don’t make the mistake of relying on one or two pages of research (or sales copy). Doing so is the reason so many would-be property investors fail. As my mum used to tell me, “If a job’s worth doing, it’s worth doing well.”

We love hearing from from you – give us a call on +44 (0)207 923 6100.

Warmest Regards,

David Lines

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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