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How To Evaluate A Profitable Real Estate Investment Yourself

Evaluating a Profitable income producing Property Yourself.

Patrick Darbois immobilier company is an imperfect market and this allows opportunities for the knowledgeable investor. There are three methods for evaluating any property purchase.

a) Replacement Value

This is comparing the costs of replacing the building with a similar structure at today’s prices. It is simple enough to obtain as all builders normally have a ‘per square metre’ building price plus add-on finishing prices such as carpets, curtains, landscaping, carports, painting etc. All that is required is to add the block value and you now have an idea of its worth. Often sleepers, that are under priced, can be found as invariably the market value will catch up with replacement value in time.

b) Market Valuation

This involves finding and comparing similar buildings to the one you are interested in and simply comparing the selling prices. Note that I stress ‘selling prices’ because the ‘asking price’ is often inflated. You need to check recent sales made of similar properties – local agents usually have a record of this activity. You can also compare prices in the classifieds, as well as checking on rents received. However, remember when comparisons are made through an agent’s records, they do not reveal the terms involved such as vendor’s finance, reduced interest rates etc.

c) Income Valuation

This method simply compares the rental currently received with the history of past increases. Once you have obtained this knowledge, you can figure out the capitalization rate of the area. Ensure that you have the total picture of the gross rentals and all expenses and outgoings that you will be liable for. Do not take the vendor’s figures as gospel, but have them investigated fully after getting them in writing. Income valuation is probably the most important of the three methods outlined, as it is critical to your cash flow. Nett operating income is the clearest indicator of a property’s worth.

The ‘Risk Factor’

The ‘risk factor’ is generally what we are all scared of. Often people work for their bosses and have no objections about risking their boss’s money thus making large profits for them.

It is also true of course, that if you weren’t earning profits for them, directly or indirectly, you would not be gainfully employed. If you are risking your own currency then there are some alternatives. You can invest in a syndicate with others and benefit from bravery in numbers. Or you could learn more about your chosen investment because with knowledge comes confidence. Put another way, most people are so busy trying to eke out a living that they have no time left for learning those techniques, which could make them financially independent.

You must understand that nobody other than yourself is as interested as you are in making yourself financially independent. Consider that your neighbors, family, boss, and bankers are all guided by the fact that your present mode of lift suits them down to the ground. Also, you should not seek advice on becoming wealthy from those who have not achieved it themselves, you stand an excellent chance of being shot down by sniping comments. They do not mean you any harm but they have surmised that happiness is ‘staying put’ and security is ‘just having a good job’.