Hard Money Loan Research

Welcome to our blog series on property valuation. In this series, we’ll be discussing one of the most important aspects of real estate investment: accurately valuing a property. At Little City Investments, we say “no” to many, many deals that were not properly valued beforehand by the borrower. Coming to a lender with an accurate idea of what the property is worth saves everybody time and heartache. Much of the valuation methods that will be covered here are also used by us internally. So by learning these methods, you will accurately be able to anticipate our valuation and make better investment decisions for yourself.

Getting Started at Valuing a Property

The best way to value a property, and the way most lenders use, is comparable sales analysis. You need to be able to see what comparable properties are selling for in order to know what a property is worth. By looking at multiple comparable properties, you’ll be able to see what value the market will likely command for a particular property. Ultimately the market doesn’t lie. It’s not based on emotions or feelings. This is the cold, hard data that every successful investor relies on. Property value is also the bedrock of most hard money loans. Without a value, there is no loan.

Let’s look at some terms that we’ll be using:

  • Subject Property – This is the property that you’re interested in purchasing, refinancing, building, etc. This is the one that needs to be valued.
  • Comps – These are comparable properties that you need to find that will show what the market is paying similar properties.
  • CMA –  Comparable Market Analysis. This is the market research that you need to do to get to a property value for the subject property.

Know the Local Area

Before you dig into the comps, it’s best to get an idea of basic info about the subject property. Chances are you’ve already seen it in person and have an idea of the immediate area. Here’s a list of basic things to look for:

  • Is it in a homogenous neighborhood? Are there similar properties around it?
  • Is it next to anything commercial, industrial or otherwise that could be an issue?
  • Is it on a very busy street?
  • Is it on a golf course?

Make a note of any detriments or benefits. You will compare this desirability to that of the comps.

Check the Tax Records

Look at the tax record of the property on the county’s tax appraisal district website. Use the acreage and square footage for valuation purposes unless there is otherwise evidence that this is wrong. Do NOT pay attention to the assessed values at this point. They will color your perception. Tax appraiser values can be accurate or wildly off base and are not reliable indicators.

Here is a list of appraisal district websites for Austin, Houston and San Antonio:

At Little City Investments we provide hard money loans in Austin, Houston and San Antonio. Get your deal funded now! 

Check GIS Data

Pull up the property on the local GIS, or Graphic Information System. GIS maps are public data sources that show all kinds of info on a property. Many buyers and owners never take the time to inspect the property in this way, but it can give you valuable info about development impediments and logistical issues. Take a look at floodplain, topography, zoning, parcel outlines and easements. Make sure there are no red flags. If there are, you’ll need to get those cleared up before making a major move.

Here is a list of GIS websites for Austin, Houston and San Antonio. (You may need to install a plugin to view these.):

Now you have the perspective and basic data necessary to jump into comparable sales research! Read the next article in this series: Pulling Comps.

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