Determining Your Investment Property Value

22. February 2012 by Kristian Alekov.

A good Real Estate Investor is constantly looking for motivated sellers that are offering deals they can make a substantial profit on. Investors have to determine what they are willing to pay for this asset without losing money in the process. There are several problems that can occur with this investment objective :

• Finding Motivated Sellers. In order to make a substantial profit, investors must offer a purchase price substantially lower than the Seller is willing to accept. If the Seller doesn’t negotiate with you on price or terms you are wasting your time. Move On!

Determining the Maximum Allowable Offer MAO. This formula allows real estate investors to determine the MAXIMUM price they can offer the seller and still make a profit.

• Determining the Property’s Repairs Costs. Sellers are usually motivated to sell their property because the asset or themselves are in a state of distress. As investors purchase multiple properties they get pretty good at determining the cost to bring the property back online.
• What is the After Repair Value APR? What will be the property’s value be after cleanup and repairs are done? You need comparables to assess the property’s value. The Multiple Listing Service MLS is a fantastic source for retrieving sale and property information but:
  • MLS is only available to Realtor Associations.
  • You have to be a Realtor Association Member.
  • Costs money to be a member:
    • Realtor License Fee.
    • Association Membership Fees.
    • Continuing Education Fees.

What if you don’t have access to the MLS to determine property comparables or COMPS? How are you going to determine a property’s value if you don’t have access to information about the neighborhood?

Don’t Worry!There is plenty of information on the internet. Most counties in the United States provide free data concerning all the properties they currently have on their tax rolls. We provide a page on our web site that lists Property Information and Clerk of the Court data for each of Florida’s counties.Once you have determined the following items:

• Repair Costs.
• If you are financing the deal, Principle and Interest or P&I and closing costs.
• Monthly Fees like:
  • Electricity and Water Access.
  • Insurance.
  • Taxes.
• Determine the After Repair Value APR.

you will need to plug in these numbers into the MAO formula to determine your MAXIMUM Offer Price.YOU MUST never, never, never, ever go beyond that price or you will lose money and the MAO price is only good for 90 days! It is based on a three month window.

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