It Requires a Certain Amount of Self-education and Exposure on Your Part to Make a Substantial Profit in Real Estate. to Understand Property Values is

Understanding Property Values Before You Invest in Real Estate

Reading or hearing about attractive benefits of real estate investment may lure you into making a substantial investment in haste. This kind of haste can potentially land you in a heavy loss rather than profit. Real estate investment is a kind of sensitive and volatile venture. It requires a certain amount of self-education and exposure on your part to make a substantial profit in real estate. To understand property values is the first step to a profitable real estate investment. Even though it may take time to master the skills to understand property values, you may benefit from the following information.

As part of learning the ABC of property value, it is relevant first of all to know that 'comp' is real estate jargon, which refers to all the homes sold within a span of the last 6 months and within an area of two miles. So, when you target buying a home, first of all find out its listed price. Then compare this price with that of recent comps of similar quality and size. Does the listed prices match the recent sale prices? If the listed price happens to be less or even the same as the recent sale prices, you wouldn't probably think twice and would transact the deal at your earliest. Suppose you have decided to buy a three bedroom, two baths home listed at $200,000. If this price is $10 thousand more than another three bedroom, two baths home sold only recently a few blocks away, you may jump to a conclusion that you are being taken for a ride. But it needn't be so.

What you should do now is to examine the sale prices of both the homes more closely by taking into consideration the differences between the home, you want to buy and the closest comps. Find out details about the property priced $10 thousand more. Does it have any special features, a bigger lawn, have extra constructions, or a pool? If you find any of the answers to these questions in the affirmative, then the chances are that the asking price is quite reasonable. In order to figure out, how much those extra features add to the value of a property, you can't just depend on the facts and figures gathered from public information sources. Glancing through dailies or Sunday newspapers won't teach you the basics of property value. You will have to do some homework to make your own chart of comps. The key to your success is: try to know as much as you can about the homes currently listed on the market. Make detailed written records of such properties, in order to learn about property value in a systematic way. For instance, if you come to know that a basic three bedroom, two baths home built on an average-sized lot sold recently for $190,000, whereas the same type home on a lot twice that size sold for $200,000 in the neighborhood, you can learn that a very large lot adds $10,000 to the value of a home in that locality. This kind of comparative study gives you a good understanding of the basic value of certain property characteristics. Update your knowledge to keep up with online listings, visiting open houses, taking detailed notes on sales prices. 

Once you have developed a sound understanding of property value and have gathered 
enough confidence, you can take a plunge into real estate investment.

Written by: HS
Date Written: 07/01/08  
Reviewer Assigned by: David
Reviewed by: GD
Quality Control: AG
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Quality Control Completed on: 02/07/2008