How would you see this?
A property (standard house) was sold by the developer to an investor 10 years ago. The house had various tenants over time. No investments were made, so significant wear and tear is visible, and investments are currently needed and foreseeable. The garden is also not landscaped. Prices for comparable new-build properties appear to have increased by about 30% (not in a major city, but in a sought-after area with limited supply). For a comparable new build (compared to the property’s original condition), the price today is around 400,000. What would be your benchmark for the existing property?
A property (standard house) was sold by the developer to an investor 10 years ago. The house had various tenants over time. No investments were made, so significant wear and tear is visible, and investments are currently needed and foreseeable. The garden is also not landscaped. Prices for comparable new-build properties appear to have increased by about 30% (not in a major city, but in a sought-after area with limited supply). For a comparable new build (compared to the property’s original condition), the price today is around 400,000. What would be your benchmark for the existing property?
N
nordanney27 Sep 2019 15:05Greenie schrieb:
A property (standard house) was sold by the developer to an investor 10 years ago. The house has had various tenants. No investments have been made, so there is noticeable wear and tear, and currently, as well as foreseeably, renovations are required. The garden is also not landscaped. Prices for comparable newly built properties seem to have risen by about 30% (not a major city, but a desirable area with limited availability). For a comparable new build (compared to the property’s original condition) you would pay around 400,000 today. What would be your guideline price for the existing property? No one can answer that for you. How much would YOU invest in the property to make it suitable for your needs? Just to make the house “nice,” or is substantial work necessary (after already 10 years)?
If I were the seller, I would probably list it for $380,000 and sell it for $370,000.
Thank you. I find that quite intense, but it’s probably almost realistic. I think we would need to invest 20,000 euros to bring everything visible up to standard and new-build level (renovation, removing laminate flooring and installing new floors, adding shutters, bathroom fixtures, shower door, possibly renewing grout). On top of that comes the complete exterior landscaping (which you would also have with a new build). Then there are renovations that would be necessary 10 years earlier (roof, heating system, facade, front door, windows, staircase…). These are not needed right now, but they will come much sooner than with a new build. Shouldn’t this be reflected in the price? How do I factor in 10 years of usage in the price?
N
nordanney27 Sep 2019 16:53Greenie schrieb:
That’s not necessary right now, but it’s definitely faster than new construction. Shouldn’t that be reflected in the price? How do I factor 10 years of prior use into the price? Not at all. It’s all about supply and demand. However, if the interior condition is “worn,” almost everyone will try to negotiate to some extent.
The big advantage of the house is that you can move in immediately. If you’re planning a new build now and start looking for a plot, you might not move in until 2022 – by then, your new build will probably be even more expensive than it is today.
Greenie schrieb:
There would be 10 years of earlier necessary renovations left. That depends. Brick facades generally don’t require renovation over the building’s life cycle. Roofs also last 50–80 years.
It also depends on the quality of materials used, the design, and how the components are maintained. What seems modern today might not appeal to you in 5 years and could be replaced even if nothing is broken. A bathroom built 20 years ago with large tiles and timeless colors can still look modern in 20 years (maybe just re-grouting the shower or similar).
H
HilfeHilfe27 Sep 2019 18:24Well, the price is determined by the market. Money is cheap, and if the house has always been rented out, it has been worth it. What is the asking price?
Hello,
Quite simple: you don’t! If it’s a desirable location, assume the seller will get a price comparable to what a new build would currently cost there, possibly even more.
In our immediate neighborhood, a house was recently sold in our development: built in 2011, about 135 sqm (1,450 sq ft) with 500 sqm (5,380 sq ft) of land and some construction defects that I, as a layperson, could spot right away. (We considered buying it for relatives but couldn’t agree on the price.) The price was somewhat higher than what our house (175 sqm (1,880 sq ft), 640 sqm (6,890 sq ft) of land, significantly better construction and finish quality, and, in my opinion, a slightly better location) cost back in 2016, including all additional costs and landscaping.
The sellers likely received 40–50% more than they paid in 2011.
Building new would have certainly been cheaper for the buyers, but there is simply no available land.
Long story short: forget any considerations about depreciation or “the seller lived there rent-free for many years, so that should reduce the price.” You’re only making things more complicated for yourself.
In a truly good location, “purchase price = current new build price” is a reasonable rule of thumb.
Best regards,
Andreas
Greenie schrieb:
How do I factor in 10 years of use in the price?
Quite simple: you don’t! If it’s a desirable location, assume the seller will get a price comparable to what a new build would currently cost there, possibly even more.
In our immediate neighborhood, a house was recently sold in our development: built in 2011, about 135 sqm (1,450 sq ft) with 500 sqm (5,380 sq ft) of land and some construction defects that I, as a layperson, could spot right away. (We considered buying it for relatives but couldn’t agree on the price.) The price was somewhat higher than what our house (175 sqm (1,880 sq ft), 640 sqm (6,890 sq ft) of land, significantly better construction and finish quality, and, in my opinion, a slightly better location) cost back in 2016, including all additional costs and landscaping.
The sellers likely received 40–50% more than they paid in 2011.
Building new would have certainly been cheaper for the buyers, but there is simply no available land.
Long story short: forget any considerations about depreciation or “the seller lived there rent-free for many years, so that should reduce the price.” You’re only making things more complicated for yourself.
In a truly good location, “purchase price = current new build price” is a reasonable rule of thumb.
Best regards,
Andreas
Similar topics