market property - What Is My market property Worth?

As a property investment company, which offers its clients a full estate branch assistance that is backed by professional advice and personal attention, we are often called upon to retort questions like ...

"What is my market property worth?"

Property Reporting

This is by no means an easy request to retort and to be perfectly honest it's only worth what someone is willing to pay. Having said this, we do however use a estimate of basic formulas so as to calculate the value of market property.

The first method

We will measure the land and resolve the square meterage. We will then resolve the store value per square meter which is dependent on the area in question. We then multiply the square meterage by the price per square meter. This will give us a rough indication of the value of the land. The price per square meter usually decreases as the size of the land increases. The price per square meter will also be affected by factors such as the proximity to road and rail networks as well as by shop frontage, foot traffic and so on ...

After we have evaluated the land, we will evaluate the improvements such as the height, size and general health of the buildings. It is usually quiet straightforward to resolve the exchange value of the facilities by retention your finger on the local building costs. You can then compare the price of new build and marginally allowance the price depending on the current state of the buildings. The ratio between the cost of new build and existing stock will vary depending on a estimate of economic factors. These factors are cyclical in nature but can be considered by an insight of where in the property cycle we are at. (This will however unfortunately go beyond the scope of this article.) Finally, if you then add the value of the improvements to the value of the land, you will have the results of the first method.

The second method

This is more often than not the beloved formula of evaluating what market property is worth. It is also favoured by the vast majority of property investors. Using this method, we will plainly evaluate the rental yield that the property can produce. The rule is simple: the higher the rent, the higher the value of the property. What most investors do, when contemplating their acquisitions, is to divide the every year rent that they will receive by the purchase price that they will have to pay. They will then compare one property with the next and will usually resolve on the one that offers them the higher yield.

They will however also take into account the drive of the tenancy agreements. If they are buying A-Grade office space with a Blue Chip tenant, a long term lease and favourable escalation clauses they will usually accept a lower yield as there is less risk to worry about. If however there are any concerns as to the integrity of the tenant, or if the lease is about to expire, then the potential risk increases. The only way to compensate for increased risk and potential void periods is to lower the purchase price and offer a higher yield.

The third method

This involves a healthy mix of the above two mentioned methods. Firstly we will evaluate the yields, this being the easiest formula to compare apples with apples. We will then allowance or add on to the value depending on the drive of the tenant and their lease agreement. Finally we will take a look at the value of the land and add to that the value of the improvements. That way, regardless of how the tenancy runs we will at least know that there is good value in the physical asset.

Having demonstrated to you the varied methods of evaluating market property, please remember that at the end of the day, these methods and formulas only serve as a guideline. We always advise our clients that we can evaluation the value but that only the store will resolve the true selling price. market property, like all property, is only worth what a willing buyer is ready to pay for it!

market property - What Is My market property Worth?