Property valuation methods. - West Kenya Real Estate Shop

Valuation is a quantitative process of determining the fair estimated value of an asset or a firm. There are various factors that are taken into account when it comes to property valuation both commercial and residential properties when considering renting, selling, or purchasing a property

Contents hide

1 The Comparative Market Analysis Method.

2 The Profits Method.

3 The Residual Method.

4 The Contractor’s Method.

5 The Investment Method.

6 House Plans in Kenya Per Categories

7 Conclusion.

This process is done to get the knowledge of an economic value of a property that can be used for bookkeeping purposes, use it to get credit loans from mortgage lenders, for property evaluation purposes, for investment reasons, for sale or purchase reasons.

Normally property owners find it hard to know their property value and get an understanding of the property market. That is when property valuation methods come in authorized by the property valuer who is an expert in the real estate market. A valuer is employed to process a valuation process by giving the actual market value of a property

The valuer determines the value of the property by applying the following methods;

The Comparative market analysis method
The Profits method
The Residual method
The Contractors method
The investment method

A property valuer can use one or more of these methods when calculating the true value depending on the type of property; commercial or residential.

A valuer will use either of the methods to get the actual value of a property depending on the type of property whether commercial properties or residential properties.

The Comparative Market Analysis Method.

Usually, this is the most common method used in property valuation, it is applied to similar properties or common properties. It is done on properties such as offices houses shops or warehouses nearby where there have been recent sales or letting, that the valuer can compare to within a fair market

A specialized report is taken afterward inclusive of comparable factors selected and properly analyzed by a professional. Later adjustments are made according to the difference in the properties to come up with a fair current value of the property.

The Profits Method.

This method is used when there is no comparable property sold, rented, or let available. The profits method is normally applied to business enterprises properties, hotels, clubs or pubs, etc. These types of properties do not have the same comparable variables. This is done by estimating the sales profit of the business and then less the estimated expenses made excluding rent payments. The digit gotten is known as the divisible balance which is the amount of capital to be shared between the landlord and the tenant.

The Residual Method.

This property valuation method is based on valuing a property that is in development or vacant land that is not in use currently and is being changed to a profitable type of property. This valuation method occurs to be inaccurate sometimes due to the number of inputs and costs that are difficult to determine as they have the tendency to vary over time.

To get the land’s value, the gross development value is less from the cost of development made which includes the developer’s profits. The amount of capital that the developer can spend on the property to improve it in its undeveloped form is the residual amount.

The Contractor’s Method.

Usually, this property valuation method is referred to as the method of last resort, this is because this method is a cost method of valuation that is done depending on the property and its situation. It is used when there are no comparatives, profits, or investments to be used. It is also applied when a property has a specialist nature. This is to mean that there are no market transactions occurring. This type of method asses all costs of providing an equivalent modern property. The subject property age is reflected by adjusting the costs.

The Investment Method.

This valuation method is used to calculate the market value of a freehold or leasehold in property from its potential to generate income in the future. This method is mainly used for the property’s main form. An example of a landlord and a tenant, where the tenant is providing the landlord rent which is a return on the investment as capital for the property.

This method analyses the sales and lettings of the property to get the revenue of the comparable property transactions. The net present value is gotten by the profit which will be applied to the future rental income and is discounted back to the present. This will indicate the current worth of the building.

Various valuation methods for a property are essential to many. In the case of buyers, valuation can reduce the risks of purchasing a property more than its fair market value mostly for those purchasing privately.

The case of sellers usually helps in getting a better idea of the potential selling price, helps in gaining the understanding of whether there can be an opportunity to make improvements to add value to a property, and also helps in interpreting the market so as to sell during the profitable time.

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Conclusion.

Do you need any kind of information and understanding on which method of valuation would suit your property? be sure to contact us for any enquiries on property at west Kenya real estate limited.

West Kenya Real estate Limited is a company that provides property valuation Services, construction, management letting, and sales services. We conduct valuation services countrywide and according to the true market value of your property. You can get us at our offices in Kisumu Cairo Road, behind Xaverian Primary School next to Hare Krishna Temple Milimani. and Nairobi CPA Centre, Block A Thika Road.

Email;info@westkenyarealestate.com

Mobile; 078921685/0124481087

If you are looking a house designs in Kenya or a construction company in Kenya for your next project, think Marble Engineering and Construction Ltd.
We are a Design and Build Construction Company in Kenya with over 25 years of experience in active building construction in Kenya. We mainly do house plans, project planning, building construction, renovations and extensions, institutional building, commercial office blocks and plumbing and drainage services.