Investing into property that is “below market value” is perhaps the investors ideal – buying a property for less than it’s worth sounds like the perfect investment of course but as always, it is rarely as simple as that.
What to look out for:
How and when was the perceived “market value” for the property derived? Property prices tend to fluctuate more frequently than they used to, and invariably with a wider range. Check the age of any valuations and attempt to find similar properties that have actually sold (as opposed to just the list prices) within the past couple of months to confirm.
Remember – “market value” is not a hard and fast rule – ultimately, the value is in what someone will pay for the property, not what a bank or estate agent values the property at.
“Market Values” can come from different sources – all have their own pros and cons:
- Land registry – Values will be what the properties sold for, however the data is usually delayed by one to three months. There is a very handy tool provided by the Land Registry for looking up property sale prices here.
- Banks – Banks provide lending and have a financial interest in the figures they publish. It’s not uncommon to see press releases from different banks about house prices in which one will claim prices are up and the other will claim they are down over a given period.
- Mortgage brokers – They too have a vested interest published figures however, if they only deal with the region of the country you are looking to buy in, historical data will give you an idea of how prices are trending over time without too much distortion
- Surveyors – Institutions such as RICS also publish house price data and are less financially motivated when it comes to house price data.
Ultimately, the key to below market value property investing is doing your own research and comparisons in the local area – don’t just take an estate agents word for it.
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