Getting better property valuations can help you make millions more from your investment.
Property valuations can make or break an investment strategy – yet many people don’t understand the process or wish it away. Unfortunately, valuations between lenders commonly vary by five per cent and, in some cases, up to an astonishing 25 per cent.
This is especially true if it is for a property being revalued as a means to access equity.
Putting that in perspective, for a $1 million property, it translates to a difference of $50,000 to $250,000, all because of contrasting opinions between a conservative valuer and a more confident one.
This is not an isolated scenario.
Considering that you only require about $50,000 to secure another investment property worth about $500,000, it quickly becomes apparent that learning how to get a better valuation is extremely important. Do the numbers. If the additional $500,000 property you gain through the equity from a better valuation grows by only five per cent, that is potentially an extra $25,000 in your pocket each year, or more than $500,000 over the next 20 years.
So learning how to get better valuations can help you make millions more by retirement.
How do you do it? If you go directly to lenders to arrange a valuation of your properties, in most cases they will require you to submit a full loan application. This can take a lot of time and have a damaging impact on your credit rating.
Because of this, a specialised investment finance mortgage broker could be potentially worth their weight in gold. Some experienced brokers can arrange valuations on the bank’s behalf without having to submit a loan application. They can also help you work out how to legitimately encourage the valuer to appraise the property up to its full potential.
There are two key ways to improve a property valuation without spending much, or any, money.
Set informed expectations with the valuer
Find out the sale prices of properties in your area that have similar qualities and features to yours, and clearly note how they compare with your property.
Getting a report from a property information company such as RP Data is a smart move. If you present this information to valuers when they visit, there is a good chance it will help encourage them to place a higher value on the property.
Get multiple valuations
Some valuers are just more confident than others and they are not afraid of valuing a property closer to its full potential. Good brokers can steer you to the lenders that use better valuers.
Nevertheless, you still don’t know how they will value your property until you see the figure in print.
It is recommended that you get three valuations for each property. While this may sound like hard work, it will pay huge dividends.
Author: Richard Sheppard This article was first written for the Sept 2014 edition of Peninsula Living Magazine.