BiggerPockets

Determining Property Value Part I Visual Inspection

Visiting the property is the best way to determine it's value and whether it is worth your investment time and money. Make sure to keep your emotions and expectations out of the process. Evaluate the property objectively using a "just business" attitude. Emotions have no place in real estate investing and will often cost the investor a great deal.

When visiting the property keep these factors in mind:

1. Condition of the neighborhood and any signs of growth.
2. Location of subject property and proximity to nearest city, main intersection or highway.
3. The property's curb appeal
4. Subject property's entry, bathrooms, kitchen, basement, etc.
5. Heating & cooling systems

When looking around the neighborhood ask yourself questions like:
- Is the neighborhood clean or is there graffiti visible?
- What's directly next to and nearby the subject property?
- Are their any signs of new development in the area?
- Are there a lot of other homes in the area for sale? If so, why?
- Find out if there's been any major change or if changes in the zoning are being considered?

Look at the exterior of the building for any signs of repairs or potential problems. For instance:
- Does the property currently have any curb appeal or potential?
- What can you see immediately that may need to be fixed, replaced, or repaired (walkway, steps, porch, deck, roof, or building facade).
- Look at the lay of the land. Is the grading sloping towards or away from the building? Are their any gutters or downspouts and were are they positioned?
- Also look for signs of insect problems such as termite damage.

If possible, take a look inside the property and scrutinize the condition of each major room such as the bathrooms and kitchen. Also determine the layout of the floorplan. Will you have to knock out several walls?

Major expenses are often connected to electrical and plumming repairs and improvments. Take a look at the condition of the heating and cooling systems.
- How old are the water cooler and furnace?
- when were they last serviced?
- Have they been maintained?
- are there any signs of rust, stains or distress?
- What kind of repairs or replacements are needed and how much?
- How old is the electical system?
- Circuit breakers or fuses?
- Does the plumming system use lead or copper pipes? Check for condensation.

Take the anticipated costs of these repairs into account when evaluating the property value and determining your offer. If your not aware of a major problem it could turn your potential profit into a major loss. Evaluating these initial repair estimates is a good start and once your offer is accepted, always hire an inspector to look everything over with a fine tooth comb.

Fair market simply represents what someone will pay for the property as is. An accurate assessment of repair costs will help you determine the Afer Repair Value (ARV). Your goal is to stay below or at that value, not to overexceed it.

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