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The problem for many landlords and for residential property owners generally is that once they have a valuation carried out, however imperfect they were, these often serve to fix a landlords expectations. These unrealistic valuations & expectations can then be very difficult to change. A friend of mine had an unfortunate experience when he bought a buy-to-let property off the back of an inflated valuation on his own home, which he ultimately intended to sell. However, the housing market in the area rapidly cooled, but his expectations of owning a half a million pound property had already been established by the estate agent. He was then effectively trapped by this unrealistically high valuation and had made a whole series of business decisions based on it. He then found it very difficult to accept that he was never going to get the value he once was led to believe that he had. Eventually, several years on he has had to concede that the property was probably all but for a short blip in time was worth a lot less than the magical half a million. He has now sold up for 30% less. Owners of residential property including landlords are notoriously bad at accepting that values have fallen or are less than a value that they were once given. They are on the other hand very receptive to high valuations and ready to believe that the value of their buy-to-let property has gone up. The result is that landlords and residential property owners will hold on to their residential properties with their over valuation rather than sell at a perceived loss. This tends to disguise real price falls, as price levels and market valuations rely on market evidence. Therefore, weak or falling residential markets will often be signalled by a fall in transactional volumes as by a slump in house prices. Importance of up to date valuation For the vast majority of landlords, having an up to date valuation for their residential investment property is not of pressing importance in the same way as having their residential investment property fully let. However, where it is significant is if landlords are making important business decisions, off the back of the assumed values of their portfolio such as was the case with my unfortunate friend. In this situation landlords need to be sure that they are aware of the pitfalls in valuing their residential investment property and make sure that their decision-making is not skewed by inaccurate or unrealistic valuations. If landlords are thinking of selling then landlord should be ultimately aware that the true value is of their residential investment property is simply ‘what a buyer is able and prepared to pay for it.’
Article Source: http://www.realestateinvestmentarticles.net
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