Using the proper method will serve you best in your bid to get accurate property valuation. Good solid real estate comps are key in this endeavour. Honestly accurate property valuation is good for a number of reasons. There are three types of valuation, income approach, cost approach and the market data approach.
Valuing a property will allow you to place it on the market for a fair price. This is especially so for residential properties. By appraising and revaluing a property you can know the equity gain or loss from the original price and the current value of the property.
A lot of people value the building and land cost and use that to value a property. This method is called the cost approach. However the most commonly used is the market data approach. In this method surrounding properties that are similar are compared and through this the value is determined.
To show the investment worthiness of a property, investors prefer the investment or income approach which uses the cost paid for the property as a ratio of the income from that property to show the worthiness.
This effectively means the income that the property generates as compared to how much is spent on it. Investors can then determine how much they have to spend on the property and how much they can gain from the property and decide if it will be a quality investment.
The income approach shows the leverage and equity capabilities of a property. It also provides an easy way for an investor to look at the bottom line on the investment.