Value the Property

Talking to a Valuer
You will probably need the services of a registered property valuer to provide an impartial and expert appraisal of the property you are interested in.

Most registered valuers are qualified and have to undertake a number of years postgraduate work experience before they become registered valuers. However, we suggest you talk to an experienced registered valuer, rather than a new valuer who has just come out of university.

You will need a registered valuer if you are going for a mortgage loan because the banks and other lending institutions only accept valuations for mortgage purposes from a registered valuer.

What a Valuer can do
The other things a valuer can help with are:

  • Appraisal of the property you are interested in buying.
  • Estimate the likely value of the property on completion of improvements you have in mind.
  • Come up with valuation for insurance purposes.
  • Estimate the values after any proposed subdivisions you have in mind after the purchase.

When you call a valuer, make sure you are clear about what you want. It's a good idea to write down all your questions. Make sure he/she is experienced in valuation work specific to the type of property you are looking at.

There will be a cost involved. Obtain a quote for their services so you are not shocked when the bill arrives. Press the valuer for a date when the valuation will be ready because it may hold up the whole process and any delays could mean the loss of the property to another buyer.

On average, the fee for a report, for mortgage purposes, will range anywhere from $250 to $400 plus GST.

What Makes up the Value of a Property?
The value of property comes directly from two components and as the value of these components changes, the value of the property will also change.

  • The first part is the ability of the property to produce an income. This income comes about in the form of rentals paid by tenants under a rental agreement.
  • The second part is the ability of the property to increase in its capital value.

The capital value is the result of:

  1. The required market yield.
  2. The net rental income.

(Basically, an investment property that never produces an income has no investment value.)

A private residence falls into this no income category, so in essence it has no investment value and only offers the accommodation of a lifestyle, which is not a financial return. An investment property is dependent on income and its capitalisation rate, and all other principles of property investment revolve around these two components.

The bottom line is that the value of any investment asset, whether it is property shares or a business, is determined solely by the income it can generates for it's owner that is capitalised at an appropriate return for the risk.

These are some of the features valuers use to determine the valuation price for an investment property.