How to Calculate Value of Any Real Estate Property?

When it comes to real estate investment, there are couple of financial considerations that come into play. The first thing that will cross a home buyers’ mind is the property's potential to generate rental income.  Secondly, it’s the future worth of the property. It’s because, even if the flat does not attract a good deal of rental income, the project might draw a profit in the future. With these points in mind, here's how you must proceed to calculate future value of your real estate property.

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The Valuations

While estimating the right valuation of a real estate property, it is to be kept in mind that unlike consumer goods, the benefits of a real property are generally realized over a long period of time. Hence, property estimation must include the considerations of economic and social trends, governmental rules, and regulations and most importantly the development of the area where the project is located. Considering these aspects; the valuation of a property depends on the following factors.

·         Demand–The desire among the homeowners to own a particular property.

·         Utility and Benefits–The advantage of having a property in a particular region

·         Scarcity–The scarcity of similar kind of properties with  the same or lower price range

Value Vs. Cost of the Property

While estimating the value of the property, you have to keep in mind that a property value is not necessarily equal to the cost of the property. Rather the cost of a property is calculated on the basis of actual expenditures incurred during the property construction. It mainly includes the cost/price of materials and labour. Though the cost of a property to a large extent affects its value, they are not the actual determinant of the property value. Let’s just say that a luxury residential complex in Dumdum is priced 35 lakhs, but the value could be significantly higher or lower depending on the scenario.

Determining the Market Value

Determining the market value of a property refers to the market price of a property on a specific date. Based on that, the appraisal reports are made, which are used by the government agencies, investors and mortgage lenders for real estate transactions. The objective of creating an appraisal report is to ascertain whether the market price is competitive enough. As a matter of fact, market price actually refers to the selling value of the property.

The accurate appraisal report depends on the systematic and meticulous collection of data. It includes specific data pertaining to the property as well as the region, city and neighbourhood wherein the property is actually located. These are collected to deduce the exact market price of the particular property.