What’s My Portfolio Worth?

What’s my portfolio worth?

With investment values nearly 20% off, according to a recent report by the IPD and some commentators now predicting that the residential property market is close to the bottom. Many landlords may want to consider the question, how much is my property portfolio worth now?

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In recent years there has been a rapid development through the Internet of tools to help landlords and property owners value their property.

We have looked previously at how a landlord should value their buy-to-let investments.

Property Hawk now looks at one of the new breed of property websites and how landlords can use it to get an accurate view of their property portfolios worth.

Is this the best property website in the world?
One of the best property valuation sites is Zoopla. We think that it is probably the best property website in the world for UK landlords, apart from Property Hawk of course.

This site was set up to rival Rightmove, and in Property Hawk’s view beats it hands down. For many users Rightmove’s dominance has been a mystery. A bit like Microsoft, it was in the right place at the right time when the digital land grab took place. The truth is, it ain’t that good.

Zoopla’s AVM
One of Zoopla’s latest features is a replication of the Automated Valuation Model (AVM), used by the mortgage company surveyors, when they value a property for mortgage purposes. It does this by employing a regression model that allows a landlord to add in certain features to their buy-to-let property to get a more accurate value than just by using the average house price for the street. For example, a landlord can specify the size of their buy-to-let property and whether it’s got parking or a garden and the AVM on Zoopla will adjust the value of their buy-to-let property accordingly.

I’ve tried it out and it works pretty well. I would say from my brief trial it was within 5% of what I, as a qualified surveyor would have estimated the price to be.

Alongside the standard sold property prices, Zoopla also incorporates the Google street view function. This is a fantastic aid for landlords looking at buying a property, particularly where they are looking at purchasing at auction and may not be that familiar with the area that they are looking to buy in.

Valuation tips
In looking at updating the value of their property portfolio a landlord has to be realistic. The RICS defines the parameters on which a property is valued. The guidance from the Royal Institute for Chartered Surveyors on how a surveyor should value residential property is contained in Appendix 5.1 of the Royal Institute for Chartered Surveyors Appraisal and Valuation Standards (Red Book). The basis for the valuation of a residential investment property is normally its’ market value. Market value is defined in the Chartered Surveyors hand book as:

‘The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’

The RICS has recently responded to criticism from the property industry over valuations for new builds by issuing new advice notes to its members which guides them through the process. It specifically calls on valuers to put into context new-build valuations in the wider economic environment emphasising the relevance of the guidance to all market conditions, both in the heady days of a boom and the gloomy days of a recession.

The note stresses the need for valuers to differentiate between the new build premium, that portion of the price paid which will evaporate as soon as a newly-built property is occupied – and those value-adding factors (such as better building materials, enhanced insulation levels, or more efficient heating systems) which are intrinsic to a new property and which will remain when the home is sold.

RICS Spokesperson Barry Hall said: "All parts of the property industry are in agreement that standards must be maintained and this guidance note will provide the foundations stones for valuers working in the new build market. Developers and lenders agree that raising standards in the profession will benefit business and the consumer."

The upshot for landlords is, that if you were told by a developer or builder that your buy-to-let apartment was worth £180,000 when you bought it. It looked fantastic with its’ new kitchen, designer taps and stylised fittings. The fact is several years on it is no longer new and the property market has moved on. If you want a realistic view of the value of your portfolio a landlord may have to ‘swallow hard’ to come to an accurate value.

Landlords keep track of your portfolio value for FREE
Property Hawk’s Property Manager 3.0 allows a landlord to record several different values relating to a landlords property portfolio. Firstly it’s useful to record what you paid for the property, the purchase price. If a landlord purchased the property many years ago this value will be largely historic although, landlord insurance brokers and mortgage companies often ask for this for a buy-to-let mortgage application and when purchasing landlord insurance.

Net value is the estimated current value (or purchase price where this has not been updated) minus any expected costs of sale, so called sellers costs.

The net cost of your investment property is the purchase price together with the cost of any improvement works carried out.

Purchasers costs are those costs incurred in the purchase of the investment property.

We have also installed a handy valuation link on the PM 3.0 that links straight to Zoopla.

Finally, do let us know if there has been anybody where their property portfolio has gone up in value over the last 18 months. Now that would be impressive!