What Adds Value To Property?

  • Neighbourhood: The location and other residences surrounding the property being valued can negatively influence the perceived value of a property. A location negatively impacts the value of a property if its area is underdeveloped or has poor access to facilities. The neighbourhood also affects a property’s value if neighbouring properties are perceived to be of low value.
  • Poor accessibility: If the valuated property’s premises is not easily accessible either due to distance from town or city, or because of poor roads, its value might be lowballed.
  • Prone to acts of God: High value will not be attached to a property located in an area prone to disasters such as incessant flooding.
  • Size of property: The less space a property has, the less value will be attached to it.
  • Poorly maintained facilities: Faults such as malfunctioning plumbing, problematic electrical wiring, faulty heating system, and such, all can play a big role in negatively affecting a property’s value.
  • Obvious wear and tear: This is especially true with older building structures. A property with more visible damage is less likely to be favourably valued.

How can a property’s value be improved?

A property’s value can be greatly increased by carrying out any of the following home renovations;

  • Installing more bathrooms: Adding more bathrooms to a property is usually a good investment that yields a high return when the time comes to sell the property. Remodelling old bathrooms also has a positive impact on a home’s value.
  • Fixing structural faults: Such structural faults can include; leaky roof, wall cracks, rotten wood, insect or rodent infestation, broken roof or floor tiles, creaky floors, unstable chimney, and other similar problems. Fixing them will in the long run improve a property’s value.
  • Installing efficient central heating: A building with effective and modern central heating in place will definitely have more value than one that doesn’t.
  • Update fittings and services: Plumbing and electrical fittings if updated and functional will positively impact the valuation of a property’s worth.
  • Add a conservatory: Adding this can yield up to a 100% return on investment. It adds extra room to your building but unlike adding a building extension, you’ll likely not need a planning permission.
  • Getting rid of superficial defects: Peeling or old paint, faulty doors, sewer smells, broken windows, mouldy sealants, dripping or noisy plumbing, ceiling cracks; are all superficial defects that can contribute to putting off a buyer and giving a property owner a poor bargaining position. Fixing them will contribute to improving a property’s value.
  • Adding a loft or attic: Converting a roof space to increase a building’s capacity is one sure way to improve a property’s value with at least a 50% return on investment.
  • Kitchen makeover: Renovating the kitchen to have a more hygienic look creates more value in the eyes of both buyers and valuators. It guarantees a return on investment of up to 50%.
  • Increase existing space: By adding more useable space to a property, the value of the property is effectively increased. Especially if that space is in the kitchen, dining and living areas.

How is property value calculated?

A property’s value is best determined through the expertise of a property valuator. To establish the true market value of a property, a valuator can use one out of any five methods. The chosen method will depend on what sort of property is being evaluated.

Profit method

This method is the preferable option when trying to valuate a business premises, such as a restaurant, mall, or hotel. It is calculated by taking into consideration a three year average of the business’ operating income. This figures will be derived from the business’ loss and profit or income statement.

Cost method

This method operates by taking into consideration an estimate of the replacement value of a property. It accomplishes this by analysing the cost of each component of a property. That is, property value is calculated by taking the free market value of the land and adding it to the reconstruction cost of the property’s building. The figure representation of the depreciation that building has gone through since its existence will then be subtracted from the previous addition.

Residual Method

This method of valuation makes use of a mostly simple calculation to help a valuator determine the actual value of a land or property purchase. It is mostly used when property developers are trying to determine if a property is good for development purposes, redevelopment purposes, or if it will be better of being used for a bare land purpose. Once a valuator has effectively made use of the Residual method, a realistic estimate of the true value of a land or property will be available.

Comparative Method

Sometimes referred to as the Comparable method, or the Inferred Analysis of property value, this method of property valuation functions by estimating a property’s value based on the value of neighbouring properties. It accomplishes this by considering relevant data that fall under the category of either Asset characteristics (location, size, condition of the property, availability of utilities, regulations concerning the property and its building etc.) or Transaction characteristics (how fast or slow it usually is to transact real estate in the subject property’s location, date of transaction, payment means, etc.)

Investment Method

This method of property valuation is most commonly used to valuate a commercial property that has been established to be capable of yielding future cash flows either through being leased or other means. Results presented by the investment valuation method come about by taking into consideration a property’s yield of future cash flow. The lower the yield, the lower the return on investment, but the higher the yield, the higher the return on investment.

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Published on 1st June 2017

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