Lotsapeoples

Real estate articles

TAKE A RIDE ON THE MILD SIDE (Cont.)

The stock market can be as scary of a roller coaster as there is.


A good thing about real estate is that it is simple as ABC

I posted a blog the other day going over “A”

Thought I would post info on “B”

Do you know your ABC's?

Jackson 5:

 

Real estate appraisal or property valuation is the practice of developing a Market Value opinion on real estate.

There are three general groups of methodologies for determining value. These are usually referred to as the "three approaches to value":

A. The Income Approach

B. The Cost Approach

C. The Sales Comparison Approach

HOW DO YOU FIGURE, THE COST APPROACH?


The Cost Approach: The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements.

In other words what would it cost to rebuild.


We put a range of $70 - $80 per square foot depending on quality of fix-up and felt this was a conservative figure.


The investment module took the square ft. of 948 and multiplied it by the appropriate cost per square ft. and then added in the land value that was obtained from the Auditors site of $11,700 and came out with a Cost Approach Range of $78,080 - $87,540



Your wait for diverse real estate properties end at Lotsa People! Contact us for rent, lease or purchase of any property you need. Register at out site and explore property options.

Steve

LotsAPeoples.com

info@LotsAPeoples.com

866.607.5699

Take A Ride On The Mild Side

The stock market can be as scary of a roller coaster as there is.


A good thing about real estate is that it is simple as ABC

Do you know your ABC's?

Jackson 5: 

 

Real estate appraisal or property valuation is the practice of developing a Market Value opinion on real estate.

There are three general groups of methodologies for determining value. These are usually referred to as the "three approaches to value":

A. The Income Approach

B. The Cost Approach and

C. The Sales Comparison Approach

HOW DO YOU FIGURE?

I had lunch with one of my customers last week and we were going over the power of the new investment module.  She was puzzled on how some of the figures were calculated, particularly the Income Approach to evaluating property.  Some friends are in the process of purchasing a property and I wanted to share with her the Income Approach to coming up with a value.



The property should require between than $42,000 and $45,000 and Net revenue after expenses should conservatively be between $650-$750 per month,

Using the Income Approach the valuation would be between $97-112k


In the investment module you can set the Capital Rate which is the interest rate that an investor wants.  I set mine at 8% which goes into the formula to come up with the Income Evaluation.  To think of it in simple English, you need to ask the question: at 8% how much would I pay to get $7,800-$9,000 annual revenue (as in our example).

It is interesting to note that the less return that an investor requires translates to more that they would pay and Visa Versa: 
Now you can look at it as asking the question:  What is my Cap Rate at the projected Acquisition amount?

Acquisition $ 42,000-$45,000

Take the Annual income and divide it by the total Acquisition amount:
$7,800 / $42,000 = 18% Capitalization Rate.
$9,000 / $45,000  = 20%

Keep in mind also that this is the running rate and does not figure in the potential additional income at time of sale.

Your wait for diverse real estate properties end at Lotsa People! Contact us for rent, lease or purchase of any property you need. Register at out site and explore property options.
Steve
LotsAPeoples.com
866.607.5699