›

need help with estimating apprec for bainbridge/kingston...

t4ueckert4uecker
edited October 2007 in Seattle Real Estate
hi there -

i'm considering buying some available land in the bainbridge/kingston area and would like to figure out a rational and fact-based way of determining a fair price. assuming that the land last traded hands about a year or two ago, i was thinking that one way would be to take that last sale price and adjust it by adding appreciation. and in particular, i was thinking i'd find out what the median appreciation was for the area and use that as a basis.

i'm hoping that this kind of data already exists somewhere and was hoping that someone could point me to it. (by the way, i did look around on the seattle bubble site a fair amount first but wasn't able to find this). and if this particular data isn't available, then i'd appreciate suggestions on what would be the most useful other data.

thanks,
tu

Comments

  • AlanAlan
    What do you mean by "fair"?
  • t4ueckert4uecker
    Alan wrote:
    What do you mean by "fair"?

    fair question...(pun intended).

    by "fair" i just mean something that's based on facts/data and is as objective as possible -- as opposed to negotiating based simply on "i want..." it's an alternative to using comps to reach a price...i just figured it would be more objective since there had been a recent transaction involving the property, whereas comps are harder to come by.

    and actually, regardless of the issue of what is "fair" or not, i'd also just generally interested in finding out what the average appreciation has been on bainbridge (and kingston to a lesser degree) to understand the market better.

    thanks again!
  • wreckingbullwreckingbull
    P/E
  • rose-colored-coolaidrose-colored-coolaid
    wreckingbull wrote:
    P/E
    Historically around 14 for all asset classes.
  • laxtosnocolaxtosnoco
    Running a P/E on undeveloped land isn't particularly easy and requires some major assumptions. Unless your income is coming from leasing said land out to a shepherd for grazing.
  • georgegeorge
    Here's where realtors actually know something. The current fair price is what someone is willing to pay for it. Nobody knows for sure what the fair price will be in 2008.

    If you plan to flip it tell 5 real estate agents the plan, then ask if they are willing to tour the property and tell you what they think it's worth for a chance to get the listing in the future. Throw out any outliers, and you have a price. Or...you could just have it appraised with much less hassle.
  • AlanAlan
    I like the P/E approach. How much income will the land generate now? How much will it generate in the future? If you build housing on it, how much would it rent for? How much would that housing sell for (which ultimately is tied to rent). When will that income be available? You have to take into account holding costs.

    The price of the land will take into account everybody's opinon on the income generating ability of the land. To get a better than average return, you will need to get a better than average estimate on the future earnings potential. I do not know how to do that, but I can guarantee that polling a bunch of strangers their opinion will not give you the edge over common opinion.

    Or you could just buy it and hope that you will find someone who values it even more. But if you are going to do that, you might as well go to Vegas and play craps. You would probably even get better odds.
  • wreckingbullwreckingbull
    I admit my 3-byte response was not very helpful, and Alan posted a much more appropriate post.

    The point I was getting at is this: We have lost sight of the concept of P/E and how it applies to real estate. This is why I rent at 35 cents on the dollar and this is why we now have a loudly hissing bubble.

    Rather that think about what a greater fool would pay down the road, take the time and perform the admittedly difficult and subjective P/E calculation. I am guessing you plan to build a residence on this land? If that is the case, take a look at comparable rents on similar-sized land, and factor in how much it would cost to put a SFH on your land, including such things as permitting, septic, power, well, etc... This will give you a reference point to start with.

    If you are talking about commercially-zone land, then of course you will have an entire new set of calculations to perform. Agricultural land...yet another set of calculations. I propose this is not a formula, but as an approach to value calculation.
  • TJ_98370TJ_98370
    For what it's worth, Eleua, who is an alleged Bainbridge resident, is convinced that Bainbridge is way overpriced and poised for a fall.

    Also anecdotedly, Bainbridge is known to be the lucky recipient of much out-of-area specuvesting the last few years.
Sign In or Register to comment.