Below the market value is a common term that is used by investors and property investment experts.
But what does it really mean?
According to the Royal Institute of Chartered Surveyors (RICS), market value is “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after property marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”
Below the market refers to any type of purchase or investment that is made below the market price, in other words, BMV is a good deal that is to the advantage of the buyer because of the ability to get properties at a cost that is lower than the going rate.
“However, there are two types of BMV properties: those that can make you money, and those that have been ignored because they are money-draining duds.
This second kind is the BMV properties that you should never buy, of course, but it’s easy to get drawn into buying something cheap which will, in fact, cost you far more of your time, money and effort than it is worth.”
Instead, you want to find the below market value properties that other investors haven’t ignored, but have missed. These are the properties that have fallen under other less observant investors’ radars, and which are ready for you to swoop in, sweep up, and make huge profits on.
In principle, an estate valuer will compare the property to other similar buildings s in the area, alongside its estimated level of demand, transferability, scarcity, and whether it can fulfill its duties as a comfortable environment in which to live, and come up with a price estimate using this combined evidence.
This is the reason to consider market value alongside questions like, “What price am I willing to pay for this property?” and “How much money will this property make me?”
Truth is, not all properties that are buyable at below the market value price are going to be significant investments. “Some of them are cheap as chips for a reason!”
In my next post, I will explain more on how to source BMV properties.