How to estimate the value of a property?

<h1>How to estimate the value of a property?</h1>Author: <a title="OngKL" href="http://www.articlesbase.com/authors/ongkl/108987.htm">OngKL</a> Thinking of buying a property and not sure whether the price is right?? To estimate the value of a property is not as difficult as you think. With some information from the market, you can do the estimation just like a professional valuer. Always remember that the value of a property depends on the potential income the property can generate - annual rental income. This has been the guideline for valuer to perform property valuation and for government to derive property tax (quit rent & assessment fee). A simple term used to estimate value of a property is rental yield. However, we call it capitalization rate instead of rental yield when we talk about valuation. But the formula is similar, i.e. capitalization rate = (annual rental income)/(property value) To determine a property's fair value, simply change a bit of the same equation: Expected property value = (expected annual rental income)/(capitalization rate of property in the same market) For example, in Johor Bahru normally the capitalization rate for apartment we use is around 6.0%-6.7%. Say if you have a unit with average monthly rental income of RM1000 in the market, annual income will be RM12,000 (RM1000×12). From the equation, your property value should not be more than RM200,000 (RM12,000/0.06). Capitalization rate depends on the type and location of the property. You can easily estimate the capitalization rate for your property by asking the latest average rental income and selling prices in the same area from your property agents. On the other side of the coin, valuers and government get the data of market average rental and property prices from the stamp duty records (tenancy agreements, sell & purchase transactions) of Inland Revenue Board and land office. Estimating the value of a property is important for us to negotiate with seller, as well as to estimate return on investment (ROI). You can read more about <a href="http://reijb.com/max-return-investment">how to finance your real estate investment for maximum return.</a>   Read more about real estate investment tips at <a target="_blank" href="http://reijb.com">http://reijb.com</a> We write regularly about real estate investment. Some of our featured articles include: "<a href="http://reijb.com/apartment-investment/" target="_blank">Why apartment can be the best real estate investment?</a>" "<a href="http://reijb.com/how-important-is-location/" target="_blank">How important is location to an investment real estate?</a>"About the Author: Coming from a humble little town called Tangkak in north Johor state of Malaysia, OngKL has chances to learn and work both in Johor Bahru and Singapore - a conurbation with 6.49 million still fast growing population - since year 1996. He is now having a chance to contribute back to the community by sharing what he sees, what he knows and what he learns in this wonderful place.

<a target="_blank" href="http://reijb.com">http://reijb.com</a>Article Source: <a href="http://www.articlesbase.com/">ArticlesBase.com</a> - <a href="http://www.articlesbase.com/real-estate-articles/how-to-estimate-the-value-of-a-property-833010.html" title="How to estimate the value of a property?">How to estimate the value of a property?</a>

Thinking of buying a property and not sure whether the price is right?? To estimate the value of a property is not as difficult as you think. With some information from the market, you can do the estimation just like a professional valuer.

Always remember that the value of a property depends on the potential income the property can generate - annual rental income. This has been the guideline for valuer to perform property valuation and for government to derive property tax (quit rent & assessment fee).

A simple term used to estimate value of a property is rental yield. However, we call it capitalization rate instead of rental yield when we talk about valuation. But the formula is similar, i.e. capitalization rate = (annual rental income)/(property value)

To determine a property's fair value, simply change a bit of the same equation:

Expected property value = (expected annual rental income)/(capitalization rate of property in the same market)

For example, in Johor Bahru normally the capitalization rate for apartment we use is around 6.0%-6.7%. Say if you have a unit with average monthly rental income of RM1000 in the market, annual income will be RM12,000 (RM1000×12). From the equation, your property value should not be more than RM200,000 (RM12,000/0.06).

Capitalization rate depends on the type and location of the property. You can easily estimate the capitalization rate for your property by asking the latest average rental income and selling prices in the same area from your property agents.

On the other side of the coin, valuers and government get the data of market average rental and property prices from the stamp duty records (tenancy agreements, sell & purchase transactions) of Inland Revenue Board and land office.

Estimating the value of a property is important for us to negotiate with seller, as well as to estimate return on investment (ROI). You can read more about how to finance your real estate investment for maximum return.

Read more about real estate investment tips at http://reijb.com

We write regularly about real estate investment. Some of our featured articles include:

"Why apartment can be the best real estate investment?"

"How important is location to an investment real estate?"

Coming from a humble little town called Tangkak in north Johor state of Malaysia, OngKL has chances to learn and work both in Johor Bahru and Singapore - a conurbation with 6.49 million still fast growing population - since year 1996. He is now having a chance to contribute back to the community by sharing what he sees, what he knows and what he learns in this wonderful place. http://reijb.com

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Article Tags: Real Estate, Property, Value, Rent, Investment, Rental, Market, Valuation, Singapore, Valuer, Stamp Duty, Estimate, Tenancy, Estimation, Capitalization Rate, Assessment Fee, Capital Rate, Hasil, Quick Rent, Rental Yield

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