A property valuation is an evaluation of your property’s value based on the location and multiple factors such as condition etc. Or we can say that pricing a property is called Property Valuation.
Property Valuation plays an important role in the real estate market because it directs the investor, to how much to pay tax for a property
Common Methods Of Property Valuation
There are the following methods through which a property can be valued. These are as follows
- The income Approach, also known as the Income capitalization approach
- The sale comparison approach
- The cost approach
The Income Capitalization Approach
It is the type of real estate /property appraisal method that acknowledges the investors to roughly calculate the valuation of the property based on the income the property generates.
Calculation Method: It is calculated by dividing NOI of rent (net operating income) by the capitalization rate.
While using the income approach, a buyer should pay notice of the condition of the property, and operating efficiency of the property
The Sale Comparison Approach
It is the real estate/property appraisal in which one property is compared to another similar property sold in that area. The main characteristics used in the sale comparison method are location, recently sold properties, features of the property, age, and condition of the property.
The Cost Approach
The cost approach is the real estate/ appraisal method that calculates the cost a buyer pays for a piece of property as equal to the cost while constructing a building. It includes the total cost of land cost of construction and less depreciation.
These 3 are the most common methods while valuing a property. While choosing the best out of them depends on the type of property, condition, and availability of information about the property.