PROPERTY ANALYSIS
Financial decisions should be made on merit and not on emotions as many people do. Reaching to a decision based on facts is one kind of awareness that is unbelievably low and is also commonly ignored and abused by many of the so called property investors.Before you purchase, it's imperative that you acquaint yourself with the common and powerful determining factors that would support your venture, as well as the others who preceedes or who'll follow after you.A good property analyst should use effective calculations on the given market and consequently enlighten the investors on the pros and cons of the particular property.
In some instances the analyst would end up with a case of very close balance of good versus bad, advantages almost equalling disadvantages, or the other way round. In such a case the decision is to be left with the investors .The first question asked everytime a property is identified is " What is the selling price?" Immediately followed by, "Is the price negotiable ?"As much as this sounds okay and normal, I'd suggest that the first question immediately .after identifying a particular property be "How much is it worth?" This question will prompt the analysis to be the first and key step, even before negotiating, but after the investors has expressed interest.Value is a vital topic for it's partly subjective and is determined by external forces. A property being either residential, commercial, industrial, agricultural or recreational will be valued based on;#1 location#2 improvements#3 zoning#4 competition#5 local employment#6 availability or otherwise of other similar properties.To determine property value, there're numerous tools, theories and methods used, some are scientific in nature and there're those utilizing no specific accuracy standards, formulas or trends. If asked i always advise on scientific methods, here an analyst use pre-programed softwares, tools etc and they are able to come out with so much data as may be needed iePractical market factors like, margins, risks tolerance, cashflow, tax benefits, these tools are able to analyze and present with such factual way that an analyst will not hesitate to confidently draw reports based on the conviction of his findings. ( the tools and methods of analysis will be discussed in depths in later posts )Visual and emotional analysis should be avoided as much as possible. True property value can only be determined by the comparatively shopping and quoting process in search of a standard/average market price in the area covered by the particular market.
Often are the cases of some investors who brush aside these factors and buy properties based on the seller's asking price, or what the brokers give as the price. I've always found it very worrying that one may take so long in car bazaars testing and even comparing prices, and yet when the same person gets to the property market they hastily get themselves quick deals and end up losing a lot of money in value.In order for an investor to realize the total value of their investments, they need to develop a means to reliably analyze and dissect the property they are considering to buy,the factors that determine value, the mode of comparison between like or almost similar properties, the effects of a slight difference in location and the consequent difference in price - these are the main hurdles that an investor must overcome inorder to reach a point of deciding what to pay for a particular property.Note, all these is to be done once interest has been expressed, before negotiating for the final absolute price with the seller - and here note once again my emphasis on negotiating with the seller/s, not with brokers.
To make informed decisions, we should not use the analysis of a given property to buy another one, each property is to be addressed independently unless the two are neighboring each other and of same ownership or are in a scope of less than 50meters and even possibly sharing similar a frontage.As much as reality estate analysis can be done by people from many quarters successfully the investors also should observe with interest and seek to be enlightened further beyond the ordinary presentation of complete document. S/he should not shy from acquainting self with the knowledge of real estate analysis through developing a habit of reading, listening to audio CD's and attending property workshops and seminars ( Richmon Property investment workshops ).The ability to analyze and even criticize a property on your own, to generate a cashflow projection for at-least the first fiscal year where you are in commercial investment, and also a location analysis and valuation is so important that if everyone was that conversant even, fraud and white elephant investments would gradually be eliminated.
In some instances the analyst would end up with a case of very close balance of good versus bad, advantages almost equalling disadvantages, or the other way round. In such a case the decision is to be left with the investors .The first question asked everytime a property is identified is " What is the selling price?" Immediately followed by, "Is the price negotiable ?"As much as this sounds okay and normal, I'd suggest that the first question immediately .after identifying a particular property be "How much is it worth?" This question will prompt the analysis to be the first and key step, even before negotiating, but after the investors has expressed interest.Value is a vital topic for it's partly subjective and is determined by external forces. A property being either residential, commercial, industrial, agricultural or recreational will be valued based on;#1 location#2 improvements#3 zoning#4 competition#5 local employment#6 availability or otherwise of other similar properties.To determine property value, there're numerous tools, theories and methods used, some are scientific in nature and there're those utilizing no specific accuracy standards, formulas or trends. If asked i always advise on scientific methods, here an analyst use pre-programed softwares, tools etc and they are able to come out with so much data as may be needed iePractical market factors like, margins, risks tolerance, cashflow, tax benefits, these tools are able to analyze and present with such factual way that an analyst will not hesitate to confidently draw reports based on the conviction of his findings. ( the tools and methods of analysis will be discussed in depths in later posts )Visual and emotional analysis should be avoided as much as possible. True property value can only be determined by the comparatively shopping and quoting process in search of a standard/average market price in the area covered by the particular market.
Often are the cases of some investors who brush aside these factors and buy properties based on the seller's asking price, or what the brokers give as the price. I've always found it very worrying that one may take so long in car bazaars testing and even comparing prices, and yet when the same person gets to the property market they hastily get themselves quick deals and end up losing a lot of money in value.In order for an investor to realize the total value of their investments, they need to develop a means to reliably analyze and dissect the property they are considering to buy,the factors that determine value, the mode of comparison between like or almost similar properties, the effects of a slight difference in location and the consequent difference in price - these are the main hurdles that an investor must overcome inorder to reach a point of deciding what to pay for a particular property.Note, all these is to be done once interest has been expressed, before negotiating for the final absolute price with the seller - and here note once again my emphasis on negotiating with the seller/s, not with brokers.
To make informed decisions, we should not use the analysis of a given property to buy another one, each property is to be addressed independently unless the two are neighboring each other and of same ownership or are in a scope of less than 50meters and even possibly sharing similar a frontage.As much as reality estate analysis can be done by people from many quarters successfully the investors also should observe with interest and seek to be enlightened further beyond the ordinary presentation of complete document. S/he should not shy from acquainting self with the knowledge of real estate analysis through developing a habit of reading, listening to audio CD's and attending property workshops and seminars ( Richmon Property investment workshops ).The ability to analyze and even criticize a property on your own, to generate a cashflow projection for at-least the first fiscal year where you are in commercial investment, and also a location analysis and valuation is so important that if everyone was that conversant even, fraud and white elephant investments would gradually be eliminated.
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