What is Value?
The worth of a good
or service as
determined by the
market
Value
Price
Sellers
Buyers
Lender
s
Appraise
rs
Psychol
ogy
Brokers
Butterflies
Price is what
you pay,
value is what
you get
Lower
Price
Higher
for what
Assumptions Be Very Careful Here Know Your Market
Returns:
IRR
Cap Rates IRV - What the cap rate represents is merely the projected
return for one year as if the property were bought with all cash
Leveraged and Unleveraged Returns
Debt Coverage Ratio Does income sufficiently cover debt? What is
sufficient? Talk with lender
Cash-on-Cash AKA Cash-in-Fist
Opportunity Cost
GIGO Do I know the market and whats it going to do
Margin of Safety Investing
Fragility?
Exit Strategy?
Valuing Development
Properties (Land)
SWAG
Factors affecting the value:
Location
Utilities
Market Conditions
Zoning Can it be rezoned or upzoned?
Politics of the area and of working with council reps, neighbors, etc.
Return expectations
To Dont Do List
Ways Not to Value Property
By What You Owe On It
By What You Put In (A improvements in a B or C building)
By What It Was Worth When
By What Someone Offered You X Years Ago
By What a Broker Tells You Its Worth (Unless They are Named
Tee or Stephen)
By What An Appraisal Said It Was Worth X Years Ago
By What the Tax Appraisal Says Its Worth
By What Cousin Johnny Told You It Was Worth
By What Your Gut Says Its Worth (Hard to be Like Jethro Gibbs)
By What a Building in Atlanta or Charlotte Sold For (even
Brentwood, Downtown, East Nashville, etc.)
Conclusion
Independent thinking, emotional stability, and a keen