Listen, real estate investments can go both ways. Each property carries its share of risk and reward. You can win big with how much your property has appreciated over the years or get the total opposite and suffer the consequences of a bad investment for the rest of your life.
Of course, having a better picture of the real estate appraisal and land valuation landscape always helps. It reduces the chances of your investment failing you, too. This is where Ohmyhome comes in. We categorized this subject into two separate parts to try to simplify the process. Firstly, we’re going to talk about the factors that affect real estate value. Later on, we’ll be discussing the three best-known methods you can use, according to professionals.
Buyers and sellers, this is what you need to know about real estate appraisal.
What Influences Real Estate Value
“The simplest way in assessing property value is knowing the market value of the properties in the area,” says Ohmyhome Sales Head Cristy Ajero.
She continues: “What really adds up or lowers the property value is the condition of the property. Simply put, the house might be built 20 years ago but newly renovated and may be refurbished with high-end materials, with additional smart home features (voice command, etc). These are some factors that can raise the value of the property.”
A house and lot or condominium near a central business district, for instance, can get pretty high value for a reason. They are highly accessible, with various transportation options and infrastructure projects. Economic development in these areas also adds to their value. Other physical factors like its position near the fault line and proximity to danger zones and accident-prone areas affect the value, as well. These can greatly determine a property’s appreciation or depreciation potential over time.
Determining Property Value
There are three prescribed ways in which you can determine your property’s value professionally and scientifically, so to say. We’re going to go over them here.
With a Cost Summation approach, a property’s value is estimated by adding the land value and the depreciated value of property improvements. In this case, the prevailing market value in the district based on the zonal value imposed by the government determines the land value. Cost summation for these two is usually done separately first before adding them together.
This is utilized to determine how much the property has depreciated and what it would cost to improve or repair what was lost from it. In conclusion, it basically gauges the cost of buying land and building a property.
Sales Comparison, on the other hand, relies on the fair market value of identical properties in the same area. They get the information from public records, local listings, and fellow real estate experts. Owners and sellers around the district are asked, as well. The differences in the number of bedrooms and bathrooms, land and floor area, date of valuation, and more are also examined. This can point you to any needed changes and improvements the property needs for it to sell.
Meanwhile, Income Capitalization is usually done with commercial investments. This method is best for income-generating properties. Capitalization rates applied to the Net Operating Income (NOI) in the first year are utilized. The NOI here is the gross potential income.
Once the vacancy and collection loss is deducted, that’s when you come up with the effective gross income. Deductions include the operating expenses. However, this does not cover depreciation values, income taxes, and debt service. This all depends on the accountant.
These should all serve as a solid guide for your investment journey. If you think appraising is overwhelming, that is because it is. Even the most seasoned of investors understand and accept the risk involved in these real estate ventures. This is why obtaining the services of a real estate professional might be your safest choice to determine property value. For what it’s worth, your peace of mind is more than enough reason for you to get one.
Are you interested in what an Ohmyhome sales agent can do for you? Get in touch with an Ohmyhome agent today to start your property journey with a free property consultation. We offer services for buyers and renters, as well as landlords and tenants.
For more information, visit Ohmyhome.com for the best and latest homes for sale in the Philippines. Download the official Ohmyhome app today for the latest property listings and more. The app is available on Google Play and the App Store.
Ohmyhome was launched in the Philippines in September 2020, following the company’s establishment of a tech team in the country in 2017. Ohmyhome was originally founded in 2016, and subsequently rose in Singapore as a leading PropTech solution and licensed real estate agency.
Ohmyhome expanded into the Philippines so that Filipino home seekers can have a real estate partner that they can trust to have their best interests at heart and can be relied upon to provide exceptional services throughout the entire property journey.
Featuring thousands of properties across many of the Philippines’ major real estate brands, Ohmyhome differs from other local platforms by going the extra mile and extensively helping buyers narrow down the choices and find the property that best suits their budgets, home needs, and lifestyle preferences.
The company’s Real Estate Agents not only help in the shortlisting of options but also provide professional services through the entire purchasing process. These include assistance in property inspections, negotiations, the finalization of the Conditions of Sale, deposit collection, the submission of property documents, as well as providing buyers regular updates.
Ohmyhome helps Filipinos find their dream homes, all while making sure each real estate transaction is complete and is an efficient and enjoyable experience.