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Real Estate Investment Software Blog

In this article, I want to inform real estate investors about “market value,” and why it may not indicate the best value for the property. It’s one of those nuances about real estate investing you might want to consider.

Market value does not necessarily equal “appraised value” or “sales price.” Market value refers to the selling price of a property only when that sale conforms to the criteria of a market value transaction. However, when you estimate the market value of a property based on the sales prices of other properties, you must always investigate the terms and conditions under which the comparative properties sold. A four-plex down the street that recently sold for $350,000, for instance, doesn’t necessarily indicate that a similar nearby fourplex will sell for $350,000. The sale price depends on the terms of the sale and the detailed features of each property.

Remember, too, the accuracy of your market value estimate directly relates to how well you describe the property’s features. Carefully identify the differences (positive or negative) that make a difference. To make profitable investment decisions, investors must know features, properties, neighborhoods, construction costs, and lot values, and then base their investment decision on knowledge, sharp reasoning, and wise judgment about their discovery.

Also, realize that market value and past appreciation rates do not forecast the future. Even if you buy investment real estate at a “bargain,” you’re not going to make money if the property is about to fall in value, whereas, you can make great returns even if you pay full market value if the property (or location) is about to take off.

Here’s the bottom line. Never buy a property without an accurate understanding of its market value. But understand that market value itself does not tell all you need to know to make profitable investment decisions. Besides figuring out what a property is worth today, also be sure to answer these questions: Will the property generate adequate cash flows? Can you expect the property to appreciate? Can you add value to the property?

PS. ProAPOD® Real Estate Investment Software 10.0 includes a comparative market analysis to assist you with market value. Plus, it includes a wide-range of computations and returns to help you analyze the property’s cash flow. Go to => http://www.proapod.com