PROPERTY VALUATION

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The Path to Success

Property values are determined by many factors in the Bay Area. It is essential to consider the property’s location, rental income, size, tenant profile, sales comparables, market conditions, property condition and curb appeal, and competition in order to formulate the current market price. It is important for the property to be priced at a fair market value in order to attract the highest number of prospective buyers and, in turn, achieve multiple offers, the highest price and the best terms. 

These factors are described in detail below:

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Location

Location. Location. Location. San Francisco is one of the most desirable city's in the world and nearly every neighborhood is attractive to renters and investors. The better the location of the property, the higher the rental income. The higher the rental income or rental income potential, the higher the value. 

Income

Building values are largely determined by the rental income they produce. Properties with higher incomes may present greater returns on investments and therefore, they may be considered significantly more valuable. However, San Francisco’s rental ordinances prohibit some units from receiving current market rate income, which makes it difficult for owners to realize the full potential value in the short term. Low cash flow can also hinder the ability for buyers to obtain financing, which can often result in a lower property valuation. Nevertheless, in San Francisco you will find many buyers who are willing to sacrifice today’s cash flow for the long-term potential. 

Size

In general, the larger the building, the higher the value. Another important way to value a building is by considering the Price per Square Foot ($/SqFt) and Price per Unit ($/Unit). Investors often use $/SqFt as a tool to compare property investments. Buildings with owner-user opportunities and/or extremely low rental income may skew the $/SqFt. Unless the property has a distinguishable advantage/disadvantage or there has been a drastic change in the market, a property’s $/SqFt will not deviate too far from the average comparable. Separately, $/Unit can be viewed as a representation of income potential. 

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Tenant Profile and Vacancy

Tenant profile and building vacancy matters. Most investors aren’t looking for a problem; they are looking for a reliable return. Vacant units give investors an opportunity to control the potential income. Vacant units make the property more attractive to many investors, particularly owner-users looking to occupy the unit and developers looking to renovate the unit or entire building. 

Sales Comparables

Once the above information about a property is taken into consideration, the property’s location, size, income, GRM and other factors listed above will be compared with those of recent, nearby sales. While some properties have many comparables, others may be very limited. Every property is different and thus the prices of comparables will vary. However, if a price is significantly higher or lower than the rest of the comparables, the value must be justified by an unparalleled trait.  

Market Conditions

Market conditions are changing all the time and, therefore, need to be taken into consideration when deciphering property value.

Property Condition and Curb Appeal

The better the condition, the higher the price. Cleaning up your building before the sale will greatly increase its marketability. While some buildings may be ready to sell as is, others may benefit from certain improvements in order to add value. Some improvements may include exterior and/or interior paint, power washing, new carpet or carpet cleaning and minor landscaping.  

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Competition

The quantity and quality of inventory in the current marketplace can affect property value. Due to the high demand for investment properties in The Bay Area, a lack of inventory has put upward pressure on pricing.

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Want to Learn the Current Value of Your Property? 

Submit a request below for a complimentary and confidential valuation. 

Please fill out as much information as you can and you will receive a response within 48 hours.

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