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Investment value is a measure of the worth or value that a given piece of real estate has to a particular buyer or investor. Depending on the circumstances of the investor, this value may be the same as the current market value identified for the property, assuming that the investor has the resources at hand to maximize the returns generated by the purchase. Should the investor currently not have those resources in place, the investment value of the property may be less than the current market price.
Since investment value has to do with the amount of value or worth that the buyer or investor places on the real estate, this type of valuation is considered subjective. This means that one potential buyer may see ways to maximize returns from the property once it is purchased, while a different buyer may not be in a position to use those same strategies and would not be capable of generating the same type of returns. In this situation, the investment value to one investor would be different from the worth of the property to the second investor.
A number of factors can influence the determination of investment value. This includes location, condition and sale price. Property that is located in areas zoned for the purposes that the investor has in mind are more likely to be considered worth the current market price, while those that are not but may be at some time in the future would present more of a risk and may be considered to hold investment value that is less than market value. The general condition of the property, including any buildings, will also influence just how much worth an investor places on the real estate. Both factors will have some influence on how an investor views the sales price for the real estate, either finding it to be reasonable or outside the scope of what the buyer believes constitutes an equitable cost to secure ownership of the investment.
Investors will also consider the expense involved in purchasing the real estate and preparing it for the envisioned purpose. For example, if a group of investors choose to purchase property with the plan of opening a shopping mall, they will consider the costs of razing current structures and smoothing the site so that construction can take place as part of the process for determining investment value. In like manner, an individual who purchases a duplex as a rental property will take into consideration what must be done to refurbish and update the units before tenants can be secured and the property can become self-sustaining. Based on what must be done to use the property in the overall investment scheme, the investment value may be higher or lower for different investors who are considering the purchase of the property.
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