Estimated Value: This value is derived from averaging the price per square foot of comparable sold properties. Your results for Estimated Value will vary widely based on comps you choose to include in the report.
It is important to realize that Estimated Value is an over-simplified estimate. There are many factors that are likely to contribute to a property’s value that are not accounted for in the Estimated Value, including: lot size, age of the improvements, changing economic conditions, construction, condition, and other amenities and features.
Margin of Error: Margin of Error is a measure of how close the results are likely to be to the Estimated Value. Good results have a small Margin of Error— roughly 10% or less. Generally, the more sample data included—especially if it is similar to the subject property—the lower the Margin of Error. Investway’s Margin of Error is determined at a 95% Confidence Level.
$/SqFt Interval: The Price per Square Foot Interval is a comparable price range (per square foot) that can be applied to the subject property at a 95% Confidence Level. In addition, the average price per square foot, as determined by the included sample data, should fall within the price per sq foot interval range 95% of the time.
Quick Sale Price: A home-grown metric here at Investway, the Quick Sale Price offers a suggestion of where to price your property to sell in relation to local market activity in your area. One very important analysis many investors fail to consider is the current supply of comparable properties for sale and how quickly that supply is being purchased. After all, the price of real estate, like many goods, is determined by supply and demand. Our formula determines the Quick Sale price per square foot and uses the subject property’s square footage to give a recommended “Quick Sale Price.”
It’s important to remember to price your property in terms of value. Value is a function of price and features. The only feature we’ve used to compare among the competing properties is living square footage. Obviously, buyers use many other factors when comparing and deciding which property has the best value; they don’t limit their comparison to just size. Other factors to consider are design and layout, condition, construction, lot characteristics, quality of finishes and many more.
Since it isn’t possible to compare these subjective features with simple numbers, the best analysis you can do is to view the currently listed properties available for sale and price your property to be a better value than your “competition” and increase your chances of selling quickly.
Quick Sale Percentile: The Quick Sale Percentile can help you position your property in the marketplace to be one of the best in terms of value—- a combination of condition and price. To get your Quick Sale Percentile, you need to know the months supply of inventory, a commonly measured statistic that is helpful in determining supply and demand for real estate. If you have a 5-month supply of inventory, then you have a 1 in 5 chance, or 20% chance, of selling in any given month. If you position your property to be priced in the best 20% (or 20th percentile) in terms of value and price, you increase your odds of selling quickly, possibly within the first month, based on the current market competition.
Est Equity This is the Estimated Equity which is based on Investways AVM
(see definition of AVM).
We take the asking price minus our AVM and come up with our Est Equity. This model for our residential properties does not account for any work needing to the property. It is a simple way to find properties that meet a certain equity criteria for further investigation and evaluation. It is not always 100% accurate but it will be close. It is NOT meant as the final amount of Equity in a property to know this you would have to have an estimate of the cost of work or anything else that you would consider as an expense to the property.
Cap Rate: Capitalization rate, commonly known as cap rate, is a rate that helps in evaluating a real estate investment. Definition: Capitalization rate, commonly known as cap rate, is a rate that helps in evaluating a real estate investment. Cap rate = Net operating income / Current market value (Sales price) of the asset.
Years to payback: Also known as Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point For example, a $1000 investment which returned $500 per year would have a two-year payback period. The time value of money is not taken into account. Payback period intuitively measures how long something takes to “pay for itself.” All else being equal, shorter payback periods are preferable to longer payback periods. Payback period is popular due to its ease of use despite the recognized limitations described below.
AVM: DEFINITION OF ‘AUTOMATED VALUATION MODEL – AVM’
A service that uses mathematical modeling to value properties. The majority of automated valuation models (AVMs) compare the values of similar properties at the same point in time. Many Lenders, and even Wall Street, use this type of model to value residential properties. While these models are quick and cheap, they do not factor in the condition of the property to determine its value.
This value would also be considered an After Repaired Value (ARV) so it would not be it value in its current condition (unless the property didn’t need any work)
This is NOT an appraisal or should it be used as the FINAL value of a property, further investigation and physical visit to the property should be done.
Standard Deviation: DEFINITION OF ‘STANDARD DEVIATION’
- A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of variance.
- In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment’s volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.
Gross Rents Multiplier: Gross Rent Multiplier (usually abbreviated as GRM) is the ratio of the price of a real estate investment to its annual rental income before expenses. It is useful for comparing and selecting investment properties where operating costs can be expected to be uniform across properties.
Gross Rent Multiplier Formula
The gross rent multiplier calculation formula is as following:
Gross rent multiplier = Sale price / Potential gross income
Net Operating Income: Net operating income (NOI) is simply A calculation used to analyze real estate investments that generate income. Net operating income equals all revenue from the property minus all reasonably necessary operating expenses. Aside from rent, a property might also generate revenue from parking and service fees, like vending and laundry machines. Operating expenses are those required to run and maintain the building and its grounds, such as insurance, property management fees, utilities, property taxes, repairs and janitorial fees. NOI is a before-tax figure; it also excludes principal and interest payments on loans, capital expenditures, depreciation and amortization.
Potential Rental Income
– Vacancy and Credit Losses
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Effective Rental Income
+ Other Income
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Gross Operating Income
– Operating Expenses
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Net Operating Income
