Risk Factors Looked At In a Real Estate Valuation

Investment in real estate can lead to high financial returns. Therefore, it is important to evaluate the risks involved. Just like every process has an impact of external risk, valuation too is affected by varied external factors. A thoughtful investigation of the below-mentioned aspects can relieve you from the risks of investing in real estate and help in careful and precise valuation.

1. Location
Location is considered to be one of the most important risk factors while valuing real estate. The vicinity to facilities like schools, markets, the surrounding locality renting status and value of property in the immediate neighborhood are important aspects in determining risk factors associated with the residential as well as property value. Apart from that, distance from banks, distance from public transportation or airport, stock rooms, whether the property is in a tax free zone or not are other important aspects, while considering business property valuations risks.

2. Financial Aspects
Land financing amid purchase and sale, payment status of insurance premium and tax proportion are some more aspects that are looked at for real estate valuation.

3. Investment Purpose and the Horizon
It is important to know the purpose for investment in real estate as missing clarity on this aspect can lead to financial loss and thereby bring in the element of risk. The investor should clearly know whether the investment is for self-use, for lease, for long term purpose or short term.

4. New Construction or Existing Establishments
Alluring pricing and financing options, choices of customization and huge supply of new properties makes a new property a preferred choice while valuing real estate. The value is higher due to residual life being higher, longevity and strength of the construction too. Whereas, for existing properties, ownership change, other and other legal matters are also be considered, apart from construction quality and longevity. Construction length is a very important part of risk evaluation prior to valuation.

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