How to value real estate?

Buying a property is one of the most important decisions we make in life. Property valuation is an integral part of this process. That’s because a good appraisal will help you make informed choices and identify housing growth potential. Let’s talk about the key aspects of real estate valuation and give you some tips on how to identify housing growth potential. So, how to value real estate?

What does home value mean?

The value of a home is one of the key factors that are considered when evaluating a property. This is the amount of money for which this house can be sold.

There are several factors that help you understand how to value real estate:

Location: location in a favorable area, proximity to the city center, good transport accessibility and the presence of developed infrastructure — all this can increase the value of the house. People usually look for housing in convenient and attractive areas, that’s the way we are.
Size and Condition of Home: larger homes with extra rooms and spacious accommodations can cost more than smaller ones. In addition, the condition of the property and its age can be important factors. Refurbished homes with modern amenities and good maintenance can be more expensive than older or in need of renovation.
Market Demand Level: if demand for homes in a particular area exceeds supply, prices will rise. Of course, this will happen in popular areas or during periods when the real estate market is booming.
Interest rate levels and mortgage affordability: financial conditions and the availability of mortgage lending play a major role. If interest rates are low and mortgages are available, this can stimulate demand for homes and increase their value. Low interest rates make mortgage lending more attractive to buyers, which can increase competition in the market and, accordingly, prices will fall.
Surrounding infrastructure and amenities: we want to have infrastructure facilities near the house. For example, schools, hospitals, sports fields, shopping malls, parks and restaurants. The more comfortable the environment, the more expensive the house.
The general economic situation and trends in the real estate market also have an impact. During periods of economic recovery, house prices often rise, while during periods of economic instability they decrease, respectively.

Comparative market analysis

One of the most common ways to value real estate is to compare similar properties on the market. In doing so, you must take into account factors such as location, size, condition, features of the object — everything that we have listed above.

Using information about properties sold in the same area, you can determine the average value of a property and compare it with the price of the property you are interested in. If the house you are considering is below the average price level, this may be an indicator of housing growth potential.

Analysis of market trends

Study and observe the market. Research the history of real estate prices in your area. If house prices have risen in recent years, this may indicate a favorable situation and growth in the future. In addition, pay attention to the development of infrastructure in the area, planned construction projects and other factors that may affect the cost of housing in the future.

For example, an area where low-rise buildings are replaced by high-rise buildings can become a bad place to live in just a few years.

Appeal to professionals

Professional real estate appraisers have the experience and data to help you determine the value of a home and its upside potential. Don’t be afraid to contact appraisers or real estate agents — they will do all the dirty work for you. They will inspect the property, take into account its features and be able to assess its potential.

Analysis of factors affecting housing growth

To determine the growth potential of housing, a number of factors must be considered that may affect its value in the future. Here are some of them:

Location

As we have already said, proximity to the city center, the presence of a developed infrastructure, the availability of public transport, schools, places for entertainment are important.

Economy

The state of the local economy, the unemployment rate, the availability of jobs and investments. Areas with dynamic economies and growth prospects tend to have the best potential for value appreciation, which makes sense.

Examine city or area development plans

Are there any plans for new infrastructure, parks, malls or other facilities that could improve life in the area? Or make it worse?

Demographic trends

Population growth, average age, population composition. Who lives in the area — elderly couples, families with children, or students planning to move out soon?

Consultation with a mortgage broker

So you can assess your financial capabilities and get recommendations. An expert will calculate your budget, help you set financial goals, and provide information about mortgage programs.

Rental Market Analysis

The market rate can indicate the demand for housing in a given area. If real estate prices are high and there is a shortage of rental housing, this may indicate the potential for growth in property values. Especially if you want to earn passive rental income.

Accounting for inflation and economic forecasts

When evaluating housing growth potential, it is important to consider inflation and economic forecasts. If house prices are expected to rise due to inflation or an improvement in the economic situation in the region, this can be a positive signal for the potential increase in the value of your property.

Unique features of the property

Consider factors such as the quality of construction, renovations, availability of additional amenities (pool, garage, garden, even the view from the window). Features that make a property more attractive to buyers may increase its growth potential in the future.

Feel free to reach out to the locals

Talk to them about the area, if they like living here. People have valuable unbiased information. They are better than many experts can assess the development of the area, problems with infrastructure or changes in the surrounding area.

Unforeseen factors

An economic crisis, changes in legislation or natural disasters — can affect the real estate market. While it is impossible to anticipate every possible unforeseen event, it is important to have the flexibility and financial resilience to adapt.

Conclusion

Residential real estate is the world’s most widespread asset class. According to Savills, the combined price of all residential properties exceeds the value of all stocks and bonds combined. According to Knight Frank’s report, it is the largest asset in investor portfolios over $1 million, accounting for 32% of all holdings versus 26% for equities.

However, despite such popularity, it should be remembered that the assessment and purchase of real estate is a complex process. It requires professional knowledge and experience. Therefore, it is recommended that you contact professionals such as real estate appraisers and financial advisors to get more accurate data and recommendations that suit your individual needs and goals. And of course will help to understand — how to value real estate?

That’s what we do at LBC Mortgage — we don’t just guide you through all the stages of a mortgage, but we also select individual financing options. Our experts help you make decisions and explain all the features of funding in clear words.