From experience we can say that an objective and thorough real estate evaluation is decisive for the success of the sale.

Property valuation: explained step by step

If the price is too low, you are giving away money, a too high purchase price alienates the real prospective buyers. Setting the right offer price is one of the most important points in selling real estate.

Before we come deeper into the matter evaluation of location, building fabric, market value & Co., first of all basic 3 questions, which reach us in consulting discussions with customers:

• How can I value a property?
• Who determines the market value of a property?
• How does the bank value a property?

Tip! Later in the article you will find much more detailed information on all types of procedures for determining the value of real estate.

Sale: age, investment, inheritance & changes

There are many reasons for selling a property. Investment considerations, an inheritance or changes in living conditions can be decisive. If there is a new generation, the family will want a larger property.

In old age, many would like to move to a smaller property in order to save maintenance costs, for example. Real estate owners often have a strong attachment to their property. A lot of time, work and love have been put into the house or apartment.

The property has a high personal value, which is reflected in the desired purchase price. If the price is too high, however, many buyers turn away immediately.

Who appears to the survey appointment, is already prepared with arguments to press the purchase price. Defects are looked for and the potential buyer finally only examines how much work he still has to put into the property. In short:

If the demanded price is far above the realistic market value, you will not sell.

For a short selling period and to achieve the best purchase price, a correct assessment of the market price is crucial.

Which real estate is valued as ?

In the following table we have compiled a list of the types of real estate and their usual valuation methods. With the valuation procedure for “offsetting”, a review of the previously determined values takes place:

Apartments (owner-occupied)

• Comparison value procedure
• Calculate with: capitalized earnings value method real value method

Apartments (rented out)

• Income capitalization method
• Calculate with: comparative value method or real value method

Residential building (owner-occupied)

• Asset value method
• Calculate with: capitalized earnings value method

Residential building (rented, e.g. apartment building)

• Income capitalization method
• Calculate with: real value method

Plot (undeveloped)

• Comparison value procedure
• Calculate with: [None]

Plot (undeveloped, but rented)

• Comparison value procedure
• Calculate with: capitalized earnings value method

Let property be valued

If you want to sell a house, our recommendation is: Get experts for a sound valuation.

A short appraisal is usually sufficient to value the property. Such an expert valuation goes beyond a standardized valuation and becomes the essential basis for determining the best offer price.

In such a valuation, experts also take into account regional characteristics, supply and demand. They help you to determine the current market value of your property. Trust in experienced contacts and achieve the best possible selling price for your property.

Valuation for real estate sales

All important information on the valuation of real estate sales summarized for you:

Income method: Distribution of traffic & building yield value

The income capitalization approach divides the property into the market value of the land and the building income value.

land value interest amount = 7 percent * 100,000 Euro = 7,000 Euro

building income value = 5,600 Euro * 12.50 (multiplier) = 70,000 Euro

This includes rental income, maintenance costs and costs for the management of land and buildings. This is compared with rental income less operating costs and the value of the land including interest.

Actual value method: Value for the new construction of a property

The calculation first determines the market value of the floor with the floor standard value, then the building standard value is added.

The real value of the building is the building production costs minus any age reductions. The land value (market value of the land) and the building value are added and multiplied by a material value factor.

Natural value = (100,000 Euro + 150,000 Euro) * 0.5 = 125,000 Euro

The calculation of the asset value factor depends on the building type, the provisional asset value and the standard land value. The total real value determined in this way indicates the financial resources that would be required for a new construction of the property.

Comparison value procedure: Comparison of similar properties

The comparative value method compares your property with similar objects. It is used in particular for the sale of condominiums and apartment buildings. The comparative value can also be determined for undeveloped land.

Square meter price of the comparison object = 300.000 Euro / 100 sqm = 3.000 Euro per sqm

Purchase price of the property to be valued = 3,000 euros * 200 sqm = 600,000 euros

Only objects in similar locations and with comparable cuts are taken into account in the comparison. The real estates entering into the valuation should come from direct proximity of the residential object. The comparative value procedure is considered as particularly realistic. It is very often used in the valuation of real estate, because the locations are regionally relatively well comparable.

Value appraisal (costs)

Who prepares valuation reports for real estate? How much does an appraiser for house valuation cost? What does an appraiser for old buildings cost? Unless legal requirements force the appointment of an expert, a real estate appraisal provides you with a realistic valuation of your property in the regional and national market. We prepare the valuation of land, residential and commercial properties promptly and precisely.

However, if the valuation report is to be presented in court, as in the case of a divorce, for example, experts with costs must be consulted. The residential or rental property is inspected on site. As a rule, both a written and a digital copy of the appraisal are issued.

Collection of formulas for real estate owners

Rent, buy, live, here you will find all important formulas for you as an owner. In our formula collection real estate you will find calculations and examples for buying, selling and renting. Rent or purchase price multiplier, gross yield, return on equity, property yield, reserves for repairs and much more. Click here to return to the overview:

Costs of an evaluation

For the calculation, a rough evaluation is first made. The price for the final valuation is therefore, in most cases, based on the estimated value of the property to be valued.

If the value of the property is below a limit of 150,000 Euros, you can expect approximate costs of 1,500 Euros. For luxury real estate or multi-family houses with a real estate value of more than 1 million, the estimated fee rises to 3,000 Euro.

• Below 150,000 Euro value, approx. 1,500 Euro
• Over 1.000.000 Euro value, ,about 3.000 Euro

Additional costs: right of way & Co.

Since additionally a right of way was judged, an impact of 20 per cent = 360 euro can be charged. This would mean that you would be charged less than 150,000 Euros for a property with a fee of 1,500 Euros for the property valuation plus 360 Euros for the processing of the right of way. The total costs are 1,860 Euros net.

Value apartment

Apartment valuation and value factors – You have a condominium and want to know what it is worth? Of course you can immediately go to an appraiser and/or real estate agent with this question. However, the exact valuation becomes important at the latest when you want to sell or bequeath the apartment. Even in the case of a mortgage – for example if you want to buy another property – the value should be determined very precisely. That is when the expert comes into play.

What influences the value of an apartment? Let’s stick to the so-called “Pi-mal-Daumen-Wert”, a very rough valuation. In order to determine the value of your apartment, a number of “soft” factors play a role.

• Valuate apartment

Rating the house

Purchase price roughly estimate or let estimate – If house or dwelling were bought not too long ago, building costs or the purchase price offer first appoximate values with the house evaluation. On the Lukinski real estate portal you can get more information about the current value of your property by comparing it with properties in similar locations, of the same size and with the same fittings etc. Our exact determination of the property price depends on various criteria.

The most important criterion is the location. The real estate prices differ regionally, sometimes considerably. Therefore only objects in the proximity may enter into the real estate comparison. As experts for the real estate sales in the regions Rhineland-Palatinate and Hessen we can give fast a realistic estimate over the real estate comparison. With the house evaluation likewise aspects of the micro and macro situations, as well as the direct location of the object are of importance: Soundscape, view and lighting conditions interest potenzielle buyers and affect real estate value and the attainable price.

• Rating the house

Rating an apartment building

Market value, valuation and purchase price of your property –

If you want to sell your apartment building, then one thing is important: A sound, market-oriented, realistic purchase price. The central questions of owners: What is my property worth? How do you calculate the value of an apartment building? How does the tax office determine the value of a house? Who determines the market value of a property? How does the bank value a property? Many questions and many facts that you will encounter when valuing an apartment building. To give you a first impression of the complexity of location, market value, comparative properties, building fabric & Co., we have written this guide on the subject of multi-family house valuation for you.

• Evaluate apartment building

Value the property

Determining market value, valuation and purchase price – How do you value a property? How to calculate the market value of a property Who may value a property? Who provides information about the standard land value?

• Valuate the property

Calculate yield: Formula collection

Calculate real estate value – rent, buy, live, here you will find all important formulas for you as an owner. In our formula collection real estate you will find calculations and examples for buying, selling and renting. Rent or purchase price multiplier, gross yield, return on equity, property return, reserves for repairs and much more.

Rental multiplier (purchase price factor)

In real estate exposés you will almost always find information on the gross yield, sometimes also on the rent multiplier. The rent multiplier (purchase price factor) is a simple key figure to compare different objects at a quick glance.

How to calculate the rent multiplier:

rental multiplier = purchase price / annual rent

Example:

A apartment in Los Angeles costs 1,000,000 Euro and generates annual rental income of 52,000 Euro, has a rent multiplier of 19.2:

rent multiplier = 100,000 euros / 5,500 euros = 19.2

Gross yield

The gross yield in percent is the counterpart of the multiplier.

How to calculate the gross yield:

gross yield = annual cold rent x 100 / purchase price

Example:

Your apartment in Los Angeles generates annual rental income of the equivalent of 52,000 euros, the purchase price was 1,000,000 euros. The gross yield is 5.2:

• Gross yield = 52,000 x 100 / 1,000,000 = 5.2

Grossthomy yield

How to calculate the gross rental return:

100 x annual net cold rent / property purchase price = gross rental yield in %

Sample calculation for the gross rental yield:

1. Step: 3.000.000 Euro purchase price + 350.000 Euro additional costs = 3.350.000 Euro
2. Step: Net cold rent per year = 150.000
3. Step: 150,000 Euro / 3,350,000 Euro x 100 = 4.47 % gross rental return

Net rental yield

How to calculate the net rental return:

1. Step: Purchase price + additional purchase costs
2. Step: Net cold rent – (annual) administration costs – (annual) maintenance costs = annual net income
3. Step: Annual net income / investment costs

Sample calculation for the net rental yield:

1. Step: 3.000.000 Euro purchase price + 350.000 Euro additional costs = 3.350.000 Euro
2. Step: 150.000 Euro net cold rent – 20.000 Euro administration – 70.000 Euro maintenance = 60.000 Euro annual net income
3. Step: 60,000 Euro annual net income / 3,350,000 Euro investment costs x 100 = 1.79 percent net rental return

Return on equity

The return on equity is calculated using the following return formula:

income after taxes x 100 / committed equity

Object yield

The property yield is calculated as follows:

rental income – maintenance costs – tax burden = property yield

Buying an apartment building: Valuation & investment

Compared to single-family homes and condominiums, multi-family homes offer greater investment stability. With several residential units, you spread the risk of rent losses and benefit from a continuous cash flow. However, it is important that you have the property professionally valued so that you neither buy too expensively nor overlook hidden risks.

PS: First investment? Here are 4 tips for your first investment with video.

Real estate valuation: What is important?

The valuation of a property is not only based on square meters and year of construction. Factors such as location (macro and micro), energy status, condition of the roof, pipes and heating, as well as rental contracts, vacancies and development potential are decisive. A rough online estimate is not enough here – it is better to have a valuation report drawn up or use professional valuation models with comparable properties.

• Valuate property

Reminder! Location, annual net cold rent + purchase price: This is how you can quickly evaluate an apartment building.

Recognize value enhancement & exploit potential

Are you looking for properties with development opportunities? Then look out for attics that can be converted, vacant properties that can be renovated or properties with potential for redensification. Converting to modern heating systems or adding balconies can also significantly increase the value. The decisive factor is cost-effectiveness: calculate each measure and compare it with the potential increase in rent or value.

Relationship between price, location and yield

In sought-after locations(A-locations, good B-locations), the purchase price is higher and the rental yield is usually lower. In structurally weak regions, you pay less – but also with a higher vacancy risk. The optimal balance lies in growing medium-sized cities with good infrastructure, stable demand and moderate prices. Pay attention to micro-location, transport links and demographics.

• A, B and C position

Calculate rental yield & value correctly

The gross rental yield shows you what percentage of the purchase price you will achieve annually through rental income. It is calculated very simply: annual net cold rent divided by the purchase price, multiplied by 100. A solid gross yield for apartment buildings is between 6 and 9 percent – lower in prime locations and often higher in structurally weak areas. But be careful: a high yield in a poor location can be deceptive if resale is problematic.

Annual net rent ÷ purchase price × 100 = gross rental yield

• Rental yield vs purchase price factor

Refurbishment property or fully let?

Refurbish & re-let

Buying a house in need of renovation can be worthwhile – if the location and substance are right. If you renovate efficiently, you can then rent it out again – at higher prices and to modern standards. In the case of vacant properties, make sure that there are no tenancies and find out about the renovation costs and possible subsidies in advance.

Fully let properties: Security & immediate income

A property that is already fully let generates income from day one. You should check all rental agreements here: Term, rent amount, indexation, graduated rents, notice periods. You should also ask for the tenants’ payment history. A mixed tenant structure without rent arrears is ideal.

Important: Tenancy law & limits of termination

You cannot give notice or raise the rent at will. Terminations are only permitted for personal use or breach of duty. Rent increases are limited by law – additional regulations apply in regions with rent control. Refurbishment costs may only be apportioned proportionately. Plan these aspects carefully.

Purchase contract & legal basis

Notary & contract review

The purchase contract is drawn up by the notary and must be notarized. The notary acts as a neutral third party and ensures that all legal conditions are met. You will receive a draft contract in advance, which you should check with your advisor or lawyer. At the notarization appointment, the contract is read aloud and any unanswered questions are clarified.

Land register, transfer of ownership & priority notice of conveyance

With the notarization, the purchase is legally binding – but you are not yet the owner. The transfer of ownership only takes place with the entry in the land register. Before this, a so-called priority notice of conveyance is entered to secure you. Prerequisite: The purchase price must be paid and the land transfer tax paid.

• Real estate purchase agreement

Taxes & ancillary purchase costs at a glance

Real estate transfer tax & ancillary costs

When buying a property, there are additional costs on top of the purchase price: Land transfer tax, notary fees, entry in the land register and, if applicable, estate agent’s commission. Depending on the federal state, these amount to 10 to 15 percent of the purchase price and usually have to be paid from equity. Sound financial planning takes these items into account from the outset.

• Real estate transfer tax

Real estate GmbH & family foundation

For larger portfolios, it is worth structuring via an asset-managing GmbH or a family foundation. This allows you to benefit from tax advantages – for example in the event of inheritance or sale after the speculation period. However, the establishment and ongoing administration require good tax and legal advice.

• Real Estate Ltd.
• Family foundation

Letting: Tenants, contracts & income

Successful letting starts with selecting the right tenants. In addition to creditworthiness and credit rating, personal impressions are also important. A clear, legally secure rental agreement protects both parties. The rent is based on the rent index, but must also match the furnishings and location. Pay attention to mandatory details such as operating costs, house rules, notice periods and rent adjustment clauses.

• Renting out a house & apartment

Conclusion: Strategy for success

An apartment building is not a short-term deal – it is a long-term investment that needs to be well planned. Anyone who knows the market, calculates the right key figures and strives for a legally compliant transaction will create a stable source of income and increase their assets in the long term. Take advantage of professional advice – for valuation, purchase, refurbishment or letting. This will help you avoid mistakes and ensure long-term success.