Real Estate Valuation

Real Estate Valuation

The first aspect to contextualize within real estate valuation is the use of the real estate and/or the land, whether it be: Residential, Hospitality, Commercial, Mixed, Institutional, Banking, Religious, Educational, Corporate, Technological, Clinical, Hospital, Agricultural, Recreational, Sports, Diplomatic, and all the various types and industrial sectors, among others. It is then important to define two major groups according to their real estate typologies:

1. Land plus Buildings and/or Constructions (L+C): In this case, we can value the land separately along with the buildings.

2. Real Estate in Horizontal Property or Condominium: This applies to apartments, commercial premises, and offices.

All valuations are based on a thorough analysis of various factors that affect the property’s value, such as its location, physical characteristics, state of preservation, and real estate market conditions.

Valuation or appraisal is carried out following recognized standards and methodologies, such as the comparative market approach, the cost replacement approach, and the income approach, among others. These methods allow for objectively and precisely estimating the property’s value.

Real estate appraisal is crucial in various contexts, including buying and selling transactions, obtaining mortgage financing, estate planning, and resolving legal disputes. The appraised value provides a solid foundation for financial and legal decision-making related to the real estate asset.

Valuation Approaches:

Market Comparative Approaches:

The value of the property of interest is estimated through a comparative analysis of the value of similar properties. Properties chosen for comparison should be selected carefully, with more weight given to those that are more comparable.

Cost Approach:

This is estimated based on calculating all costs associated with the construction or replacement of the property (replacement cost new). The calculation includes various concepts: land value (market), building costs, land improvement costs, etc., and necessary associated expenses.

Income Approach:

This is estimated based on capitalizing the property’s rental income. The best method is discounted cash flow (DCF) analysis, which determines a project’s profitability over time using an appropriate discount rate based on the expected objectives.