Property Value Analysis

[Nicholas Catania]

Hello, I am new to real-estate investing and I am trying to educate myself as much as possible. When you look for a property to buy, how do you determine if the property is under or over value and how do you determine if that property will go up in value over the coming years? Is there some sort of tool that you use? A website?

Thank you!

[Kuba F.]

@Nicholas Catania value is defined by what would a knowledgeable, unpressured person be willing to pay for a house in an open market. In real estate, value is determined by relation to other properties using the principle of substitution, which states that a knowledgable willing buyer will not choose a property that's priced higher than a similar comparable property. All that means, is that you can find fair market value by running comps which looks at what people just paid for similar properties recently. While it's best to run comps from the MLS to which access is restricted to real estate pros, you can run comps on a number of websites including Zillow, Redfin, or even many assessor's websites, with Redfin being the best free option in my opinion as it is connected to the MLS.

Appreciation is difficult to predict, and you have to look at the socio-economic factors that would influence it, be it job growth because of a particular industry moving in, or how the unaffordability of surrounding neighborhoods pushes people into lower priced neighborhoods driving those prices up for example.

Good luck with your education!