Thinking Like an Investor in Property Valuation
Property valuation serves as a crucial tool in financial decision-making, including investment decisions in real property. From an investment perspective, related to valuation, investment perspective helps understanding the current state of the property market, and evaluating the factors that influence their investment decisions.
1. Understanding Market Conditions
An investor first assesses the overall condition of the market, whether it is in a phase of expansion, stagnation, or contraction. This understanding is vital, as the chosen investment strategy, such as buy, hold, or sell, will largely depend on the current market cycle.
To gain deeper insights into the property market, you may want to explore: Understanding the Real Estate Cycle
For example, in a stagnant or declining market, investors tend to be more cautious. Their focus shifts toward risk analysis and the property’s actual income-generating potential. Adopting this, a valuation is not only present a market value to user, but also include analyzing and supporting data such as:
- Demand and supply trends,
- Vacancy rates,
- Projected maintenance costs,
- And overall rental performance.
2. Considering Investment-Driven Factors
Investment decisions are also shaped by multiple strategic considerations, such as:
- The investor’s risk profile,
- Availability and source of financing,
- Zoning and land use regulations,
- And regional development plans.
The same applies in valuation. A Valuer uses the income approach to assess how an income-generating property delivers specific economic benefits.
Example: Thinking Commercially in Rental Property Valuation
When valuing an income-generating property, the Valuer must go beyond technical calculations. They need to adopt the perspective of an investor or prospective tenant. One key question to ask is: How much would a rational investor or tenant be willing to pay to rent this property?
For instance, a commercial shophouse in a strategic location with potential retail tenants. An investor would naturally consider whether the annual rental cost aligns with the projected sales or profit margin from operating in that location. Therefore, the Valuer must think commercially and practically, almost as if they were the investor themselves, to ensure the valuation reflects real-world logic and expectations.
Example: Factoring in Development Plans
Another important consideration is the future development of the surrounding area.
For example, an investor may find out that a new toll gate, integrated terminal, or business center is planned near a plot of land being offered. This information signals that the area is likely to experience increased economic activity and rising demand for property. As a result, when assessing a property affected by such developments, the valuation outcome can indicate whether it meets the investor’s expectations or not.
These are just a few examples of “Thinking Like an Investor in Property Valuation”, but there are certainly any more aspects worth exploring.
I hope this article brings you value and insight.
Warm regards,
Penilai Publik – Property Valuer & Advisor
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Penilaian.id oleh Asti Widyahari
Property Valuer & Advisor
Ni Luh Asti Widyahari, S.T., M.T., MAPPI (Cert)., is an experienced property valuer and advisor based in Jakarta, Indonesia, with extensive expertise in property valuation and property consultancy. She is the founder of Penilaian.id and CekNilai.id. Asti is also an active speaker at international conferences, promoting the property valuation profession and professional development in the sector.
Tentang Asti Widyahari
Ni Luh Asti Widyahari, S.T., M.T., MAPPI (Cert)., adalah Penilai dan Advisor Properti berpengalaman yang berbasis di Jakarta, Indonesia, dengan keahlian dalam penilaian properti dan konsultasi properti. Ia adalah pendiri Penilaian.id dan CekNilai.id. Asti juga aktif sebagai pembicara di konferensi internasional, mempromosikan profesi Penilai dan pengembangan profesional di sektor ini.
