Don't Mistake Real Estate Market Value For Best Value

By Author: James Kobzeff
Total Articles: 44
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Prudent real estate investing requires a sound understanding about a rental property's market value, and why it may not necessarily be the best value for the property.

Market value doesn't always equal a property's "appraised value" or "sales price." Market value refers to the selling price of a property only when that sale conforms to the criteria of a market value transaction. However, when you estimate the market value of a property based on the sales prices of other properties, you must always investigate the terms and conditions under which the comparative properties sold. A duplex that sold recently for $350,000, for instance, doesn't mean that a similar nearby property will sell for $350,000. The sale price depends on the terms of the sale and the detailed features of each property.

Moreover, bear in mind, that your market value estimate is only as accurate as your description of the property's features. Carefully identify the positive and negative differences that make a difference. To make profitable investment decisions, real estate investors must have ample knowledge about features, properties, lot ...
... values, construction costs, and neighborhoods to adequately base their investment decision on wise judgment.

Also, realize that market value and past appreciation rates do not forecast the future. Even if you buy income-producing property at a bargain, you're not going to make money if the property is about to fall in value. Whereas, you can make great returns even if you pay full market value if the property (or location) is about to take off.

Here's the bottom line. Whereas, you never want to buy real estate without an accurate understanding of its market value, understand that market value itself does not tell all you need to know to make profitable investor decisions. Besides figuring out what a property is worth today, be sure to answer these questions, too: Will the property generate adequate cash flows? Can you expect the property to appreciate? Can you add value to the property?

Remember, successful real estate investing depends on knowledge; so the more knowledge you obtain and correctly analyze, the better and more profitable deals you will make.

About the Author
James Kobzeff is the developer of ProAPOD - proven real estate investment software since 2000. Create a real estate analysis in minutes! Go to => www.proapod.com