Getting The Most out of your Investment: How to Determine the Value of Your Property

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Determining the value of your property is crucial as an investor because it allows you to make informed decisions about the potential return on your investment. Whether for purposes of buying, selling, or renting, knowing the value of the real estate asset can help avoid overpaying or missing out on higher gains. Moreover, valuation of property in Kenya can be a complex process, therefore understanding the factors and methods used to arrive at property value can aid in making informed decisions during investment.

Factors that Influence Property Value

There are many factors that can influence the value of a property, and it’s important to consider each of them when determining the value of your property. Some of the most important factors to consider include:

  1. Location: Properties in desirable locations, such as near the beach or in urban areas, are often more valuable than those in less desirable locations.
  2. Size and Condition: Larger properties are generally more valuable than smaller ones, and properties that are in good condition and well-maintained are often more valuable than those that are run-down or in need of repairs.
  3. Amenities: Properties with desirable amenities, such as swimming pools, parking, or outdoor spaces, are more valuable than those without.
  4. Market Trends: In a booming market where demand for real estate is high, properties are more valuable than in a slow market where demand is low.

Determining the Value of Your Property

While investors can certainly determine the value of their property on their own, it is best to use a professional valuer. For example, for mortgage purposes, lenders often require an appraisal report in order to approve loan financing, which is required by law. In addition, if the property is unique or complex, such as a commercial property or a property with multiple units, it is essential to use a professional valuer to ensure an accurate valuation from experience. In order to clearly determine a correct valuation of the real estate asset, there are several methods that professional valuers use to determine the value of their property. Some of the most common methods include:

  1. Sales Comparison Method: This involves comparing the property to similar properties in the same area that have recently sold. This helps determine the market value of the real estate asset based on what similar properties have sold for. The valuer can then adjust the price based on the differences between the subject property and the comparable properties, such as the number of bedrooms, bathrooms, or amenities.
  2. Income Capitalization Method: This method is often used for rental properties and involves estimating the potential rental income of the property and then capitalizing it into a present value. The approach considers the expected rental income, expenses, and the property’s rate of return to determine the value of the property. This approach is commonly used by investors who purchase properties for rental income.
  3. Replacement Cost Method: This method estimates the cost of rebuilding the property from scratch. The approach considers the cost of the land, labor, and materials, and then subtracts the depreciation of the property to determine the value. This approach is commonly used for new properties or properties that have been recently renovated.

In summary, determining the value of your property is a crucial step as an investor looking to make informed investment decisions in the Kenyan real estate market. This includes understanding the local real estate market, analyzing various factors that influence property value, and considering professional valuers where necessary. By taking these steps, you can make informed decisions that maximize your returns and minimize potential risks while investing in real estate.