THE MODERN DEFINITION OF PROPERTY ‘VALUE’
The UK property market has become a largely open and free market made up of thousands of individual transactions by individuals and organizations with ambitious goals.
The market’s ability to freely exchange information is crucial to the decision-making process that underpins these transactions. Now accessible to everyone thanks to the Internet, information on real estate prices is no longer reserved solely for players in the sector. As a result, the owner community now includes many more people.
There are two methods widely used in the UK to calculate the value of property purchased for rental purposes:
(i) The comparable (“comps”) approach, which is most popular among real estate investors but requires regular transactions to be carried out;
(ii) The yield is determined using the yield/income method, which is popular in commercial real estate and is also supported by a number of well-known stock market investors, including George Soros and Warren Buffet. While capital growth income should always remain at the heart of any purchase to enable the investor’s strategy, cash flow will always remain “king” and ensuring that you are making a healthy profit each month will enable you to weather the storm. any impact, regardless of how the market is. Also note that this is a gross figure (management costs, insurance, maintenance, repairs, etc. must be deducted).
Professional property appraisers base their estimation of value not only on comparable information from related transactions (where available), but also on their appraisal of the present market climate and the quantity of properties being exchanged. The overall status of the economy, interest rates, governmental/tax policies, and environmental factors are among the other external elements that might have an impact on valuations.
When pollsters take a conservative view, it should reflect a strict approach the parties take in the actual dealings and uncertainty of the market of which they are a part. It is also important to note that many professional surveyors would agree that value is really what one person will pay another for a property, and in order for value not to be lost, both parties must be well informed and act in harmony. result. Consequently. an arm’s length relationship.
The first step in determining a property’s potential is to do some due diligence. Many websites offer general transaction statistics, and the Department of Communities and Local Government can provide information on local patterns. They are an excellent approach to understanding major movements even if the validity of several of these indicators has been questioned.
More specific local searches can be obtained through subscription websites (such as “Hometrack”, which tracks prices according to the land registry, as well as various other factors, including sales-to-asking ratios, time spent on the market, realtor sentiments, and mortgage levels to name a few). Estate agents may be contacted on the basis that they will be able to assist you in your future business dealings; they are approached with tact and are not restricted in providing information (such as client confidentiality, for example). Additionally, proof of rental is readily available through local rental agents, the Rightmove portal, local news sites, etc.
A common problem during a real estate downturn for investors and surveyors, when there are so few transactions in a market, is to firmly establish true open market value (OMV). However, most RICS building surveys performed, have a solid understanding of the property and done by talking to professionals; participate in ongoing investigations (monitoring sales and remortgages, for example); using whatever local government contacts they have and adhering to their own code of conduct (the RICS ‘Red Book’). Depending on the purpose of the report, the appraiser will also consider most of the following when making an appraisal decision:
– planning consents;
– short, medium and long-term planning issues in the area;
– recent works of repair/improvement/refurbishment to the property;
– available consents;
– boundaries and related responsibilities;
– location and routes of utilities;
– environmental issues;
– contamination issues;
– flood risks;
– subsidence risks;
– details of construction if it is non-standard.
A RICS commercial valuation is a professional assessment of the market value of property or land, taking several factors into account. It is often carried out for mortgage purposes, financial matters, building insurance purposes, or as part of a building survey to ensure that the property is a sound investment.
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