Helpful Hints # 3

This hint might have you go back and look at some of my previous blogs, for I have written on the various methods used to appraise properties in the past. Because of this fact I’ll not gives example of how they work these methods; however, I will tell you which method you may wish to consider when purchasing real estate.

• How to Determine the Value of a property Using the Comparison Approach November 25, 2023
• Property Valuation Using the Income Approach November 29,20223
• Cost Approach December 2, 2023

After reviewing these blogs, you should be able to determine which method should be used to appraise you potential and how best to increase the properties value and raise your ROI. The reasoning behind knowing which of these methods to use is of vital importance to a real estate investor is simple: once you know how a properties value is determined you know how to increase the value of the property.

• Single family dwelling- Improve its image in the neighborhood (Value is based on comps)
• Multi-unit apartments- Improve the efficiency and rent more apartments out or charge for extra services. (Value is based of income it produces)
• The cost approach is applied to unique buildings and some may think it would apply to investors, however people are purchasing churches and converting them into their homes. (Value base off cost to build another like it.)

It is also important to realize that an appraiser uses his formula and they offer their opinion. If you had 50 appraisers, come to your property for their services you should have 50 cost evaluations.  Some give weight to where the home is other to what the home is. Although you pay for the services, the lending institution chooses the appraiser they want to use That can make a huge difference in the value a property is given.

Some appraisers use the square footage of the home. In those cases, adding square footage may be the best thing to do to increase the value of an undersized home. If you choose this method, you must be realistic. If the home is a 800 square foot 1 bedroom and you and two more bedrooms and the house still has no master bedroom and only one bath in you 800 square foot addition you have increased the properties value but you haven’t maximized the potential of your capital.

When you are looking a potential investment you should study it to see which improvements you will make to increase it value before you apply for the loan. Knowing What you are going to do and understanding how what you do affects the value of a property. Some would be beginning flippers come in and violate the first rule of real estate investing. Do no harm. They then try to sell their vision of what the property could be but usually have to accept what the property now is instead. It a simple warning that you have to know you can finish what you start or you may harm the property’s value.

 None of this should be seen as new information. These approaches have been around and used for years and years. Simply study them and learn how to manipulate the market you property is in to maximize you ROI.

Note: Images on this blog site are from a free source or taken by the author. No image or group of photos is intended to represent the people the author serves. The author does not care about Race (that is a politically correct term that he does not like because we are all of the same Race, the Human Race. He prefers the term ethnicity, color, religion, sex, gender, marital status, disability, genetic information, national origin, source of income, Veteran or military status, ancestry, citizenship, primary language or immigration status.) He is a service provider for all people. We will all rise together when we band together and help one another. Joseph Erwin is a Real Estate Broker, DRE # O2131799, and a CA general contractor # B 696662. He’s a member of the CRMLS and The East Valley Association of Realtors located in the Inland Empire region of Southern California.