What is the value of a piece of land? How to calculate the market value of a real estate property? I know your mind is full of all these questions but don’t worry just sit back as we are going to find the answers to all these questions one by one.
It’s not easy to get the right valuation of a property you must have profound knowledge of the world of real estate to decide the correct value of the land otherwise you will make a fool of yourself. You must be well-versed with the rules and regulations that revolve around real estate property. A lot of factors such as property’s location, size, shape, level, as well as legalities play a crucial in figuring out the market value of the land.
What is the best way to calculate the market value of land?
The Buildup method approach is one of the most used ways to find out the market value of the land. Here you can start by considering the interest rate and add the following:
1. Appropriate liquidity premium comes out due to the illiquid nature of the real estate property. In simple terms, liquidity premium is the difference between two types of properties that have mostly the same batch of qualities except for liquidity.
2. Recapture premium: This type of premium will provide you with a helping hand in calculating the total accounts for net land appreciation.
3. Risk premium: What we mean by risk premium is to analyze the level of risk that is involved in the real estate industry.
This method of calculating the market value of land is quite simple and straightforward, the only complexity that lies in it is when one has to obtain accurate estimates for the individual elements of the capitalization rate, which can be a tricky challenge in itself. The biggest advantage of making use of the Build-up Method is that it tries to define and accurately measure individual components along with the discount rate.
By what other ways can you measure the right value of a piece of land?
Another way of getting accurate statistics on the value of the real estate property can be the Sales Comparison Method. In this method, you lay some emphasis on the value of the neighboring properties as well. This method is also known as the fair market value method. If you stand by this method, then you will have to measure the property square per foot.
Let’s take an example, if you want to calculate the value of a 3 BHK flat in Delhi, then 1800 sq. ft is a super built-up area. The rate of the property is going to be 72 lacs. Rate (Rs./sq.ft)= 72000000/1800 = Rs 4000 per sq.ft
Once and for all when you calculate the correct value of the property then pay some attention to the fact where is the property located if the property is located somewhere near a bus stop, metro station, park, for that purpose you can add up a premium amount to the actual price of the property before selling it to anyone.
In case, you are selling a real estate property that is a furnished one, then you can depreciate the prices of the property, and then add up the amount of lump sum to the total worth of the property. Some people believe in the Vastu and Shastra when buying a house, if your property has been built as per the Vastu and Shastra then you can add it as amenities to the value of the property.
We don’t have only these two ways to acquire the real cost of a property, there are plenty of other ways available in the market to calculate the accurate price of the land. The other procedures are as follows: Land and Building valuation, and Rental Method of valuation.
These methods are the best alternatives for estimating the exact value of a real estate property. Through these methods you can measure the value based on the cost, then you have the Development method of valuation and Depreciation method of valuation.
What details are required for the process of finding the market value of land?
My friend if you want to find out the real market value of a piece of land, then you will have to follow a proper procedure and you must have all the details of the real estate property all ready in advance. Following are the details that you must have in hand.
• The district under which the place comes
• Taluka: Further division of districts is known as Talukas or Tehsils
• The name of the division or village
• The kind of property whether it is a residential property or a commercial one
• More details like C.S. (Cadastral Survey Number), C.T.S. (Chain and Triangular Survey Number), F.P. (Final Plot Number), S.N (Survey Number) and G.A.T Number (Area Number) of the property.
When you plan to buy a property make it a point to know the correct market value of the property so you don’t get exploited by the owner of the property and the same condition will help you out even if you are on the other side of the door. In that position of the seller, you must have a clear picture of the market value to ensure that you are getting good returns out of the property.
Before analyzing the price of a property be certain of the fact that you know the real estate property inside and out, then only you will be in a spot to put the right price tag on it. It’s always better to be a person who knows it all than the one who knows nothing.
Estimating the right value of a property is a thing that is of great importance for the seller of the property. It is essential to know about all the methods for calculating the market price of a property, and then only you will be able to narrow it down to the one that meets your needs and expectations.