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Why is it important for you to know the value of your assets - it’s a thread
A lot of people loose out on deals because they don’t understand their value. The reason why African’s were trading gold for whiskey was this.
A lot of people loose out on deals because they don’t understand their value. The reason why African’s were trading gold for whiskey was this.
The reason why re segetse batho lehatshe is because of this.
When you don’t appreciate the value of something you more likely than not measure its value by its usefulness to you.
When you don’t appreciate the value of something you more likely than not measure its value by its usefulness to you.
On the flip side is the tendency to speculatively hold on to a piece of land because yet again you don’t understand it’s value, you over estimate it’s usefulness to the next person simply because you have not figured out it’s usefulness to you.
Let me break it down. How much is the house you are living in worth? Whether rented or owned ? Half the time we only look for a valuation because we want to transact.
If you understand what the house you are living in is worth, your attitude towards it changes.
As a tenant
- you appreciate you are living in a house either you cannot afford to buy so you “might” take more care of it.
As a tenant
- you appreciate you are living in a house either you cannot afford to buy so you “might” take more care of it.
-it gives you an indication ya gore what financial level do you need to reach to own the property.
As an owner
- you keep a tab on your investment, against your mortgage, if it is mortgage financed. And if not you still get to know how much “capital” is sitting in your house.
- you keep a tab on your investment, against your mortgage, if it is mortgage financed. And if not you still get to know how much “capital” is sitting in your house.
- you know how much backup capital is available for future investments, business opportunities or other endeavors and dreams.
Most of us value our property for the bank. Infact it’s usually the last thing done, we often perceive it as expensive without appreciating what it’s purpose is.
There are at least 4 valuation methods that are applied in valuing a property. Often the method is decided by the purpose of the valuation.
For instance if I want to sell my house that I live in. The purpose of the valuation is to determine how much it would sell for if I sold it today. So the method used is called Sales Comparables method.
With this method, my house is compared to similar properties that have been sold in my area and a determination is made on how much mine would go for.
@InfoVantage have automated the simplest version of this on http://gosmartvalue.com where you input a few generic property info and it gives you this indicative figure under quick property valuation.
The factors that differentiate my house with others are more detailed, number of bedrooms, bathrooms, other features like pools and fireplaces. It’s not about how much I spent building them it’s about how much more or less people have paid on similar
On http://gosmartvalue.com again, you are able to get an instant report for P750 where after you have done the quick property valuation you input features specific to your property and get an actual report.
Then the detailed valuation, the one most people believe is expensive, includes the involvement of a professional valuer who then uses their expertise to predict as much as possible how the market conditions can affect your value.
The valuer adds a premium or a discount to your property looking at specific unique features of your property or the environment it is in. They pick up nuances of the prevailing buyer terms, financing conditions and give you a detailed valuation
Again you can instruct a valuer on http://gosmartvalue.com to get this done. This cannot be prepriced because the valuer does not know what they will find in your property that makes its value more nuanced and their fee is based on what the ultimate value is
Now second valuation method. If my house if rented out, it is generating income. If I want to understand it’s value as an income generator. An income capitalization method is used. In that case the valuer determines if
1. My rental is market related
1. My rental is market related
2. Is it sustainable for at least 5 years and upto 10years.
Then the valuers determines the operating costs of my house.
- cleaning, garden maintenance, pool maintenance, utilities
The determines the residual value of the house at the end of the 5 years
Then the valuers determines the operating costs of my house.
- cleaning, garden maintenance, pool maintenance, utilities
The determines the residual value of the house at the end of the 5 years
Or 10 years
Looking at the returns of competing asset classes, equities, bonds, cash adds a prevailing related risk premium for property investment usually around its illiquidity. Uses that to get a discount rate for my determined future cash flows
Looking at the returns of competing asset classes, equities, bonds, cash adds a prevailing related risk premium for property investment usually around its illiquidity. Uses that to get a discount rate for my determined future cash flows
Then calculates the value of my house.
You will note this is definitely more involving and more complex than the 1st one.
Again from the get go a valuer cannot tell your how much their fee will be because they don’t know.
You will note this is definitely more involving and more complex than the 1st one.
Again from the get go a valuer cannot tell your how much their fee will be because they don’t know.
Third method : Replacement Cost
This one is usually used when I want to know how much it will cost for me to rebuild my house should it burn down completed today.
This is the only method which the cost of your marble floors matters. Required for insurance
This one is usually used when I want to know how much it will cost for me to rebuild my house should it burn down completed today.
This is the only method which the cost of your marble floors matters. Required for insurance
Fourth method is used for special purpose assets; schools , hospitals, that kind of thing. Where your valuers tries to the determine the highest and best use value of that asset. It’s a whole book
So why do you need to know this? Simply, your dreams are more likely housed in one property or another so you must know how the value is determined. For your negotiation, planning budgeting, in a more realistic manner you need to understand these things
On the other side, I also want you to stop asking me why the insurance value is different from your open market value on the same house!
