Hello all,
Ever wondered how some investors always manage to find those bargains while the rest buy at Retail? Well, one of the key’s is in the valuation.
So, why is a market valuation so important? Because this seemingly insignificant report determines how much instant equity ( or Negative Equity ) you have created on purchase. Let’s work a simple example:
You purchase a Home for $100,000
Property Valuation ( Not Appraisal ) at time of purchase $120,000. Instant Equity $20,000.Remember this example work’s just as well in reverse, but hey where not interested in Negative Equity are we!
So that leads me to my Discusion Topic, VALUATIONS – The Key to Instant Equity, Sharing your knowledge, Tips & Tricks in achieving this seemingly impossible feat would be much appreciated!
Regards The Sco![8D]
Have faith and you will achieve good things happen when you believe
valuations are not the only thing to consider
maybe for some, have a proper depreciation schedule done
look to maximising in all areas, but you knwo bottom line, serviceability , if you aint got it and cant do it, you going nowhere fast (unless bank manager or lender allows you certain things eg line of credit based on equity, use it for what you want then)maybe?
Elves
Esier said than done. Do a search on valuations on this fourm – there are many opinions/suggestions in this area.
https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=5376&SearchTerms=valuations
James
Valuation is very dicey, it`s what someone will pay that`s the true worth, may be more, may be less.
If you were to make this $20k instant equity and sold you`d make next to nothing, you may as well get a job in R/E the pay would be better!.
If you were to accumulate R/E this way then be forced to sell, through lack of tenants, lost job, or many other reasons you would actually be bankrupt unless the market moved significantly.[
]Ensure that when you are seeking a valuation report, that the Valuer is on the panel of proposed Lending authority.
Regardssykesbuild
‘Think and grow rich’
Napoleon Hillit’s all about building the foundations of your wealth… manage your cash flow, generate capital gains, revalue to borrow and build it up. Valuations are just one of your tools.
Valuers can be difficult people. I prefer to add my equity by renovating – from a simple lick of paint to a new kitchen, replumb, rewire, whatever – consider what will improve the rent and what will look more valuable than it cost you – that’s how to increase equity without the market itself moving. Don’t ever trust a valuer!!!!(tongue in cheek!!!)
Castle Dreamer
(You’ll never go wrong if you never go anywhere – have a go!”
I prefer make a renovain first then revalue it later.
Julian [
]THERE IS ALWAYS A BETTER WAY!
Do your research on the area. Put together a ‘dossier’ and give to the valuer. Don’t only show superior properties to yours, that won’t get you the price you want.
don’t BS.
Cheers
MelMel’s right.
Bearing in mind that the valuer will probably be doing 3 or 4 vals in the day he inspects your property it makes it a whole lot easier if you or the agent can provide some reasonable comparables. They should be settled sales of alike properties in close proximity to your new purchase. It’s always worth being bullish with your estimate for a refinance because the banks will occasionally let it through without a val or have a panel valuer do a ‘drive by’ to check it out. As easy as it is, the extra equity is real money to be drawn down.
The biggest problem with generating instant equity from a purchase is that when a mortgage val is done after exchage the valuer will always adopt the purchase price as the value even if the property has been bought well. Obviously if it has been bought poorly they will adopt a price below purchase. This relates more to their legal liability than actual market value. This is hard to get around as the bank will appoint their own independent valuer and will be most unlikely to consider evidence form one you instruct.
So it seems there’s much more chance of creating ‘optomistic’ equity in refinaces as opposed to new purchases.
Anything that can increase the rent also (even with residential I have seen banks willing to lend more). Dolf De Roos example with the carport is excellent one.
And as people have said, renovations. Everything from a new coat of paint for one, two or all rooms, new kitchen appliances (stove/oven) to a new Kitchen, Updated bathroom (whak one of those heat lights), so many options avalible.
Rgds.
Lucifer_auHi there, strangely enough we went to a home open sale and I immediately thought the property was overpriced by about $40,000 -$50,000. I asked the real estate agent our she came up with the figure (sale price).
She embarrasingly informed me that she felt it was definately overpriced but as the owners had received a valuation from the bank at this particular price they decided to go with it.
To cut a long story short, it sold for about $30,000 under the sale price.
I have not heard of this happening before, but I guess anything is possible…..
Thankyou for everyone’s input, i would like to add that creating this equity on the purchase – as difficult as it may seem – is definately possible and is an area I’m looking into. I have had discussions with lenders who will lend based on a self Commissioned Valuation.
As the market place changes there are even greater opportunities to purchase well below val. a few points worth noting.
A true Market Valuation begins with comparable sales. Using this as our starting point. Comparable Sales in the current climate would still be quite high, So your chances of getting a Val Higher than your purchase price go up considerably.
Timing and the way you instruct the valuer during the valuation process is very important.I have has discussions with Banks that have told me that they are unwilling to value the property before settlement. Why do you think that is? They went on to say that the valuer takes into consideration the List Price, and asks the agent what offers have been placed & how long the property has been on the market.
To me List Price, Offers etc.and the agents opinion for that matter is fundamentally irrelevant for the simple reason that ultimately what people have actually paid for property Type/ characteristics “X” determines true market value!
Suffice to say I now commission my own valuations and I time them before settlement. I also commission valuers that independantly value properties without the agents opinion and/or marketing.
Thanks
The Sco![suave]
Have faith and you will achieve good things happen when you believe
Reno’s will not automatically increase a valuation. If your reno just brings a place up to scratch, it doesn’t mean it will be valued 20k above your neighbour’s house. It doesn’t mean it will automatically increase the rent either.
Whilst holes in the walls or a roof falling off will probably *reduce* the valuation, a coat of paint and a cosmetic tidy up will probably merely put the value of your home at what it should be worth in the first place.
Don;t get me wrong- i think reno’s are fab!! [thumbsupanim] I just think a lot of people think that by bringing a house up to merely tenantable, it will add tens of k’s onto the price. Sometimes it will, particularly if one has bought it undervalued in the first place, but people need to be realistic about the biggest factor in valuations- past sales of other similar properties in the ‘hood.
kay henry
Oops- just had another thought about this. eflecting what I was saying above… you know when your house is a [oink]sty, or your car needs a service and a wash… when you clean up your house or car, it only just really brings it back to what it was supposed to be. hehe- don’t know if this thought is worthwhile putting, but it makes it clearer for me
kay henry
Very true,
Past sales within say a 5km radius is what drives your valuation, So if you managed to buy at a discount, and then spent a little on say the “WOW” factors ( Landscaping, paint etc.) mix it in with some good marketing, whatever your strategy ( Buy & Hold/Flip/Wrapp etc.) your sure to make a descent profit in any market.If I had to rate all these in terms of effort, It would be like this.80% Buy Well
15% Marketing
5% minor RenoAny views.
The Sco![suave]
Have faith and you will achieve good things happen when you believe
interesting topic here,
I ve only sourced deals where instant equity was predictable. I ve looked at growing suburbs with new estates and land subdivisions, tracked sales figures of spec homes, compared floor plans and inclusions with different builders then built our own. I ve done this 3 times in same amount of yrs and 1 to commence this month. One we completed in dec 03 cost under 200k. valuation come in at 300k at 80% refinanced and pocketed an extra 40k. although not +cf it does have instant equity which i leverage into the next deal.
Sco,
Try this. Valuers are humans just like most of us, but they are treated strangely. For the most part people do not know what they are doing or even care. If you are valuing a rental or your own property then take the time to go to see the valuer. Tell him/her what your plans for the property are, make a cup of coffee and scones for them. Tell them about you kids or your sick mum. If they feel someone appreciates their work you may get an extra 5-10k on top of your val. Thats giving you an extra 4.5-9k from the bank for the price of some chat and a cup of coffee. If you use the same bank or broker most times you can request the same valuer.
aluminati.Sco,
Try this. Valuers are humans just like most of us, but they are treated strangely. For the most part people do not know what they are doing or even care. If you are valuing a rental or your own property then take the time to go to see the valuer. Tell him/her what your plans for the property are, make a cup of coffee and scones for them. Tell them about you kids or your sick mum. If they feel someone appreciates their work you may get an extra 5-10k on top of your val. Thats giving you an extra 4.5-9k from the bank for the price of some chat and a cup of coffee. If you use the same bank or broker most times you can request the same valuer.
aluminati.
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