Run through an example of using the cost approach to valuation.
- The cost approach to valuation makes a simple assumption,…that a potential user of a property…will not, and should not, pay more for a property…than it would cost to build an equivalent property;…that is, the value of the property is the cost of the land…plus the cost of construction minus the depreciation.…In the industry, this is often known…as the replacement method.…If we had a near identical plot of land…and built a new structure that has the exact same functions…using the current materials and utilizing current designs,…what would it cost today?…As you can see,…this is a great approach to use for new properties.…
Let's look at an example.…All right, let's look at a quick example…of what the cost approach looks like.…So here the cost approach.…We start with what it costs…if we were to build a new building,…a new dwelling of the same size.…So assuming market costs about $125 per square foot…to build a 1,600 square foot house.…Here, that would be the cost here.…
We have 1,600 time 125.…And then let's say there were some upgrades,…
Note: This course uses data and example properties from the United States, but the concepts taught and tools provided are just as useful for any market.
- Determining if real estate investment is right for you
- Choosing a market and a property
- Using financing
- Strategies for first-time investors
- Real estate market cycles
- Valuing a property
- Analyzing your market
- How leverage impacts investments
- Real estate investment case studies
Skill Level Appropriate for all
Excel: Analyzing and Visualizing Cash Flowswith Curt Frye1h 16m Intermediate
Learning Real Estate Photographywith Scott Hargis3h 21m Beginner
Managing Your Personal Investmentswith Jane Barratt1h 31m Appropriate for all
Start here3m 29s
1. Case Study: Joe's First Investment
2. The Many Ways to Invest in Real Estate
3. Real Estate Market Cycles
4. How to Value a Property
5. Understanding Your Market
6. What Makes a Good Investment?
7. Understanding Leverage
8. Case Study: Rental Income Property Analysis
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