Investing in property , of course, we must know the purchase price of a property . Price is going to be the basis for calculating the value of our investments . Expensive or cheap relative to the actual price , depending on the condition and position of where the property is located. The closer to the amenities of the town , the more expensive, but the sooner the graph increase in value . Buying a property at a low price but not a strategic position does not mean profitable , because its value will propagate slowly . Price is based on this position is called the market price , because its value is based on the average price . Additionally There is also the so-called emotional price , the value is not based on position but based on emotion , eg the artist , or the hero ( if in the area including the former home of religious scholars ) . So , if you want to become an investor , you must be observant when it comes to this price . According to Joe Hartanto Property Cash Machine in his book there are 5 types of property prices generally accepted , among others :
1 . Market Price
The market price is the price of land in the area plus the price of the building is reduced by the depreciation of the buildings . So if the building is not new , then the value of the building should be reduced by depreciation . Essentially the same as the price is not land prices in the new building added to the price , because there is no element of depreciation . Usually the amount of depreciation of the building is approximately 5 % per year .
2 . Demand = Price emotional price
Demand price is the price offered by the seller . Often the price of this emotional price is higher than the market price , because there are elements emotional there , for example, the former artist , the former officials , the former president , and so on . Therefore, be careful with this price , because the price is requested by the emotional value of the home , and that’s what you like in the selling of the property .
3 . The new reproductive Price ( price + the price of the land around the new building )
Well if that is the price of the property based on the price of land around the area plus the price of the new buildings that occupy the building. An example is a new housing , usually there is no land prices and building prices . The price is usually also called replacement cost , which is the price which is often used to market the property developer .
4 . Fast selling price = price liquidation
This price is the maximum price normally provided by banks to lend . Normally the value is 80 % of the market price . Why why banks only lend only 80 % of the market price ? The answer is because in case of bad loans to the property and the bank will sell the assets , then if the bank will sell quickly , so the price that can be offered is about 80 % of the market price was . Well the 20 % that is usually called the margin of safety or security of the bank rate limit , meaning that if the bank had to sell the property quickly which belonged to the bank , then quickly selling price is usually around 805 , so if the bank wants to sell at a price mentioned , the bank actually had nothing to lose .
5 . Transaction price ( actual price )
The transaction price is the actual price that occurred on property transactions . Well of course as a good investor , the transaction price should be less than the market price , so that it can profit when buying . What is more if you can get the transaction price below liquidation price , the better, because if the property should be fast , then the minimum of the property will be sold at liquidation prices , and once again investors will still be profitable .