Improve Your Denver Property Evaluation Skills for Better Investments
One of the most significant differences between a great investor and an average investor is their ability to quickly evaluate a Denver property. Great investors can walk into a new listing and know within minutes what they want to offer, what they anticipate spending and what the expected value after repair will be. When you are new to the business, it can take dozens or even hundreds of properties before you feel truly comfortable with the process. Mastering the skill of evaluation will help you save time, make better offers and increase your bottom line on each deal.
Develop a System
The best way to begin your Denver property evaluation is to create a checklist and develop a system because without a firm system in place, you will enter new properties without any direction. A checklist will give you a roadmap of what steps you need to take and what items you need to look for. At this early stage, you are not looking to assign a value; you are simply looking for any defects or potential issues. Begin with the exterior of the property and then work your way inside. Look for problems with the foundation, roofing, siding, walkways and windows and take note of any major landscaping projects or improvements that will need to be made. As you make your way inside, avoid cosmetic items and look for larger issues. Cosmetic issues are most commonly an easy fix, but problems with the furnace, water heater, plumbing or electrical systems will be costly. Coming up with a unique and comprehensive checklist will help guide you through evaluations.
Start Small
Trying to master all types of Denver properties in different markets is overwhelming, so to improve your evaluation skills, it’s best to narrow your focus and start small. Choose a handful of local areas and a specific type of property to focus on. If single-family properties are abundant in your area, then target these types of Denver properties. When you evaluate a small number of properties, you are able to retain more information and rather than spending time driving all over from Denver property to Denver property, you can devote time to researching the items that truly add value. Choosing a specific market area will help you practice evaluation skills until you are comfortable with the process.
Review Property Transactions
Review Denver property transactions from the MLS, online real estate valuation sites and your local tax assessor’s office. The first and most obvious item you will see is the sales price, and while this number is important, it’s also important to understand why the property sold at the price. Check out the specific features of the property including the property style, square footage and room count, but don’t be influenced by amenities like a pool or movie room. You may find these attractive, but not every buyer will. As you review the property transactions, look for a consistent pattern in the properties that have sold and what features these properties have. Reviewing transactions will help you understand how a market determines value.
Build a Team
When it comes to property evaluation, there are several people you can count on to help. Perhaps the most important member of your team is your real estate agent because a good agent has direct knowledge of all recent property transactions. Real estate agents may have seen a property firsthand or have discussed the listing with a selling agent, and they look at several different properties before deciding to list a property at a specific price. Your real estate agent can also answer questions about how value is determined on a property and will want to make you comfortable with the process. You can also network with local property inspectors and appraisers who know the market on a local basis. Working with these individuals can help you form a better understanding of what influences value.
Open Houses
In order to come to a true understanding of value, you need to look at what is on the market. You should attend every open house that you have the opportunity to and look at the subtle nuances that separate properties in the market. Looking at properties will help you accelerate your learning curve when it comes to evaluating value because you will have physical evidence of things that increase value as opposed to simply guessing at what these things may be.
Learning how to evaluate Denver property is important because when you are able to do it well, you make the real estate business much simpler for you. Rather than guessing at what the value may be, you will have an idea of what value a property may have before you make an offer. Practice these tips to hone your skills at evaluating property for more successful investments.