Important things to know about real estate value estimation

Property valuation is essential in the real estate industry. It gives an insight to the seller and the buyer about the approximate value of a house.

There are different ways to evaluate the net worth of a property. You can follow either a single method given below or combine them to find the most accurate figure.

Comparable sales method

The value of the property depends on the prices of similar apartments or houses in your neighborhood. It is also known as residential real estate valuation. How much you need to invest depends mostly on the present value of the properties. However, this is an old-school concept.

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Discounted value of rentals

Unlike the comparable sales method where the price of the property reduces in the presence of defects, the discounted value of rentals works differently. This method helps to understand the future rental appreciation of the apartments.

For example, consider the busiest place in your city. Properties in this location are more likely to have a high price, and the cost will be higher in the future. The discounted value of rental for this location is calculated after inspecting the growth in demand in the real estate of this location and also the availability of properties. It is the demand-supply relationship that determines the value of the property.

Automated valuations

This is the fastest way to evaluate the value of a property. It is a cost-effective method that uses computer-generated models. The automated valuation model considers the historical data indexed to predict and calculate the present value of the property. However, it does not consider the real comparison of the other properties in the same neighborhood. So, you may find different valuations for different apartments even though they are right beside one another.

Income approach

It is also known as the intrinsic or fundamental method of estimating real estate value. This approach focuses on the property value instead of comparing it with similar properties. Two factors determine the worth of the property you want to invest in: the projected future net income and the resale value of the apartment. This is a more realistic approach to find the real estate value estimation. When you consider how much the property value will increase, you get the approximate amount of maintaining its revenue.

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From data to diversification

Apple’s recent decision to launch a new credit card and streaming service has been interpreted as an attempt to strengthen its services business in the face of falling global iPhone sales.

But is the firm’s decision to diversify destined to succeed and should other businesses pursuing growth in maturing or shifting markets follow its example?

Apple is not new to diversification. The company has a track record of diversifying to improve its performance and drive shareholder value. Once a computer hardware manufacturer, Apple Computer became Apple Inc in 2007, marking its focus on consumer electronics. More recently the company has been seeking to re-educate shareholders that instead of tracking global iPhone sales, they should be focusing on the projected growth figures for its services business – as this is where it believes the real growth opportunity lies.

Even with a strong list of partners, the company’s decision to become a content curator is not without risk. It will take time and money to develop a catalogue of high-quality news programmes, drama series, documentaries and films that will appeal to its global customer base.

In the meantime, established players such as Netflix and Amazon Prime Video are competing for consumers’ eyeballs and already offering user-friendly, competitively-priced services. However, with record revenue generated by Apple’s services business in Q2 2019, it is clear that the potential rewards are considerable.

The key to de-risking any move to diversify lies in good quality data and knowing how to use it. In Apple’s case, the business has a ready-made market for its credit card and streaming service and through a process of consumer market testing by profile, content type, territory and device, it can predict demand for its diversified offering with some degree of certainty. This data can be used to plot a roll-out plan that is geared to optimising returns while mitigating financial risk and protecting enterprise value.

Not all businesses opt to diversify for the same reason. Some are seeking growth in a market that is maturing rapidly or where regulations or other restrictions are limiting the company’s growth potential. Others want to de-risk their business model by investing in a variety of products or services, rather than just one. Whatever the motivation, a structured, data-driven process will improve their chances of success.

Research by Harvard Business School indicates that 95% of all new consumer products fail to achieve their commercial objectives. Many are dropped before reaching the market and others shortly after market entry. The later the decision to draw a line under the new product development (NPD) process, the more collateral damage is likely to have been done to the company’s financial performance and enterprise value. With the odds stacked against them, what can businesses do to de-risk their plans to diversify?

Move to an ‘adjacent square’

Rather than taking a leap into the unknown, the decision to diversify should be a calculated step into an ‘adjacent square’ where the business can leverage its existing expertise or tap into a known market. Achieving the right balance of proximity and stretch will enable the business to leverage its scope and scale to the fullest extent, while driving performance and controlling risks. For example, Amazon’s decision to launch its own fashion lines, instead of simply providing a platform for third-party sellers, was an example of vertical integration – a step designed to seize more margin and increase control. Alternatively, a horizontal step could take a business into an unknown market where it could apply some existing expertise or know-how.

Test the market

To mitigate risk when pursuing diversification, the business must be certain about whether there is market demand for any new product or service development. Just because a competitor is making strong profits from a specific activity doesn’t automatically mean that launching a rival product or service would achieve the same success. A detailed and analytical approach to market testing is required to ensure there is market demand to support the business case for diversification.

Get data-ready to diversify

Before deciding to diversify, a business should make sure it fully understands where value lies in its existing business model and where it will come from in the future. Such insights are critical when deciding how to leverage the scope and scale of the business. When preparing a business case for diversification, it is important to have a clear understanding of what success and failure might look like in terms of financial data at key points in the roll-out plan. Before making any move, it may be necessary to take a step back and ensure the business is data-ready to diversify, with access to reliable centralised data.

Roy Williams, co-founder and managing partner at management consultancy, Vendigital.

Factors that influence business negotiation

Negotiation is a skill that many believe is hard to acquire. It has been under appreciated for quite some time, until recently where it has been brought to the attention of several businesses.

We undergo negotiations in all aspects of life: the services we use, things we purchase, even what restaurant you are willing to go to. With that being said, it is extremely important to be familiar with negotiation skills and the key factors that play a role in the process.

The key factors that are going to be portrayed in this article influence the art of business negotiation. Steve Gates, the author of The Negotiation Book, lays out three key factors that play a crucial role in the negotiation process.

Power

Power since the beginning of time has been the decider of how countries, businesses, etc. operate and today is still a prevalent determination of rank. While holding great power is effective, in a negotiation situation, it can be quite detrimental if not used properly. For instance, power can be used to manipulate another person. In this state, it is more beneficial to not partake in using your power to get what you want.

Overuse of power can result in the counterpart feeling threatened or manipulated resulting in a hostile environment and potentially even a deadlock. A deadlock consists of no agreement and both parties walking away empty-handed. This is the worst-case scenario and in order to prevent this from happening, one should not engage in using their power to control the other individual’s decision.

There is a time and place for excessive use of power, unfortunately, it is not the best to use as a negotiation technic. Power influences the negotiation process as a whole and can be responsible for either making or breaking the agreement.

Trust

Trust goes a long way in all aspects of life. When It comes to business, trust is one of the most important traits one can have. Everyone wants to be trusted, however, it isn’t that easy. Trust is something that has to be acquired over time and must be achieved through repetition and accuracy. One doesn’t simply gain trust from their counterpart; it must be earned. In a negotiation, trust goes hand and hand with respect.

If someone can trust you they can learn to respect you. Steve Gates states that “if you are able to maintain a good balance between trust and respect, and create the right environment in your meetings, you will have created an environment where it’s possible to secure better and more sustainable agreements.”

The goal in any negotiation is to end in a mutual agreement that benefits both parties. If you can achieve maximum trust and respect from your counterpart, you should begin to see a higher success rate in the number of negotiations that end in an agreement. Building trust takes time and is a process, however, as mentioned above, one must not get too comfortable with the amount of trust they have. This can be seen as a use of power, which to your counterpart, could be taken the wrong way.

Understanding total value and mutual opportunities

In any negotiation, there are several opportunities worth considering. The more opportunities available, the more possibilities there are for total value from both parties. Would you want to walk away from an agreement with less value than you could have potentially gained? I’ll answer that for you. No. You want to consider all possibilities and opportunities in order to achieve full value. Take a new car for instance.

If you had two cars, same colour, price, mileage, etc. to choose from but one had a higher safety rating wouldn’t you choose the car with the higher safety rating?  It makes sense to choose that car because you are getting full value from the price you are paying for it.

Its all about getting the best bang for your buck; and in this instance the best value is the car with the higher safety rating. To improve your negotiation skills you can turn to businesses such as The Negotiation Society who have over 20,000 global members and a huge knowledge bank of negotiation videos, tips and news.

Negotiations are very similar in that you may have two similar possibilities but one will end with a better result and higher value. That is why it’s very important to weigh out all of your options and pick the one that is going to benefit you the most. If you can master finding the total value in a negotiation, you will see that the majority of the time both you and your counterpart are walking away satisfied.

If you are able to understand and consider these factors when participating in a business negotiation you can give it the best possible outcome with both parties benefiting.

HS2 line cannot be delivered within £56bn budget & could rise by £30bn

The chairman of the High Speed 2 rail project has reportedly warned that its cost could rise by £30bn.

HS2 chairman Allan Cook has written to the Department for Transport to say the high-speed line cannot be delivered within its £56bn budget, according to the Financial Times.

The DfT said a review of HS2’s costs is continuing.

The line will connect London, the Midlands and northern England using trains capable of travelling at 250mph.

“The chairman of HS2 Ltd is conducting detailed work into of the costs and schedule of the project to ensure it delivers benefits to passengers, the economy and represents value for money for the taxpayer,” the DfT said in a statement.

“This work is ongoing. We expect Allan Cook to provide his final assessment in due course.”

The first segment of the project between London and Birmingham is due to open at the end of 2026, with the second phase to Leeds and Manchester expected to be completed by 2032-33.

An HS2 spokesperson said: “We don’t comment on leaks or speculation.

“We have previously noted that our chair, as you would expect, continues to scrutinise the programme, and regularly reports back to the Department [for Transport].

“We are determined to deliver a railway that rebalances the economy, creates jobs, boosts economic growth and is value for money for taxpayers.”

Mr Cook was appointed to head HS2 in December 2018 after his predecessor, Sir Terry Morgan, resigned as chairman because of delays at the Crossrail project in London which he was also leading.

Getting To Know You: Amina Oyagbola, Business and Management Consultant, AKMS Consulting & Founder of WISCAR

Business Matters spent time with Business and Management Consultant Amina Oyagbola and found out who, and what her inspirations are.

What do you currently do at AKMS Consulting Ltd?

AKMS Consulting Ltd is a business and management consulting firm. We provide professional and business solutions to address the concerns of our clients and to improve the performance of their businesses.

Our solutions are knowledge and experience based, and tailored to meet the needs and objectives of our clients. After graduating from Ahmadu Bello University in your home country of Nigeria, you earned master’s degrees from both the University of Cambridge and Lancaster University.

Why did you choose to pursue higher education in the United Kingdom? Trinity College Cambridge, a leading college in one of the finest universities in the world, presented to me an opportunity to refine and hone my legal knowledge, to specialise in selected fields of the law, and to distinguish myself in the field.An MBA at Lancaster was motivated by my strong desire to broaden my career horizons and acquire general management and business skills.

That way, I was able to avoid professional limitations and to advance a career in industry and corporate management. I went to Lancaster as a Chevening scholar and consequently, I was able to draw on the informed advice of the British Council in choosing it. The modules it presented to me as well as the excellent networking opportunities were excellent platforms for me to launch a career in business, management, Human Resources and consulting.

The location of these enviable institutions was, for me, a boon as it was like going back home – my early education, up to my time at Ahmadu Bello University, was in the UK.

What was the inspiration behind your foundation, WISCAR?

The need to build and develop the next generation of female professionals and business leaders.

By this, I seek to pass on the baton handed to my generation by the select few exemplars that went before. WISCAR has, in my opinion, picked the ideal mechanism for achieving the generational passion on of leadership, skills and development initiatives. I refer of course to mentorship as a tool for enabling and enhancing women.

At a critical stage in my professional life, I was identified and selected to be part of the Aspen Global leadership network. The name Aspen speaks for itself. But it is important to note that ALIWA (Africa Leadership Initiative-West Africa), broadened my analytical and public service horizons.

It revealed to me the great potential of public-facing private initiatives for enhancing the well being of society.  That special perception helped me to conceive WISCAR.

Who do you admire?

I admire two amazing women who have shown staying power in very complex and challenging pursuits. I say pursuits because these are women in leadership who were forced to contend with issues from diverse fields of human endeavour.

Angela Merkel, over the course of more than 14 years, has shown grace, grit, savvy, humility, and wisdom in the way she has handled the German state. Like every political leader, she has had mud thrown at her, but she has shown an unusual deftness in warding off the dirt whilst at the same time keeping the thrust of her political friends and followers.

Ellen Johnson Sirleaf went through truly trying times in her political journey. She has navigated her troubles astutely and managed to transform her country from one with a seemingly hopeless future into one with hopes of total redemption. It must be noted as well, that she is the first female Head of State in Africa, which is certainly a landmark achievement.

Looking back on your career, is there anything you would have done differently?

I would not change anything in my career track. I, however, exhort women to deliberately focus on building relationships and a strong network to advance their careers and achieve success. I would also encourage women to speak up in pursuit of their goals and to be bold in seizing opportunities presented.

What defines your way of doing business?

Hard work, integrity, ethics, industry, drive, value delivery, knowledge, and expertise form the cornerstones of my professional engagements and consultancy practice. I keep my promises and put in the desired hard work to deliver value to my clients. I ensure that I only accept briefs and assignments that I am qualified and competent to deliver on. I thrive on challenges and strive for the delivery of creative and practical solutions. I am result driven and focus on positive outcomes and client satisfaction.

What advice would you give to someone starting out in your career?

Be honest, hardworking and humble, and focus on creating value. Ensure you have the educational base, knowledge and expertise to work in your chosen field. Ensure that you continue to learn (be a learning individual and run a learning-organisation).

Ensure you are principled and ethical, and that you give of yourself in the interest of the public. Take courses and read books that add value to you and attend webinars, conferences and seminars.

Finally, deliberately and intentionally build your network of friends, colleagues and associates. Ensure that you continuously initiate, plug into, and grow networks and that you involve yourself in the development and education of others in your professional life. In sum, create and nurture professional value chains.

You were recently honoured with a Lifetime Achievement award at the HR People Magazine Awards. What does an award like this mean to you?

Being a recognition of my professional value and worth within the industry, I was thrilled and felt enhanced by the award. Thrilled because of the accolade it represented; accolades paid by my predecessors and peers. Enhanced, because it represented due recognition of all the pain, hard work, and sometimes even soul-searching that went into my work.

I have always felt the need for total immersion in my professional engagements and pursuits. There were times, however, that I would question the sheer effort and dedication that I invested in my work.

This award has validated my values and the ‘all-in’ approach to my work.I hope and trust that it will inspire other HR practitioners to achieve, add value to organisations, and excel in strategic human resource management.

For me, the award is a call to re-dedicate myself towards the provision of leadership and support in the HR profession and use my rich and varied knowledge and expertise to address the business and management needs, and concerns of my clients through my consultancy practice.

How do you continue to grow professionally?

I attend conferences, workshops and seminars. I read relevant books and learn continuously from research in the course of executing briefs and assignments, and from several chat groups and professional bodies, I belong to. I strongly believe in continuous learning, improvement and development.

Eve Sleep causing investors sleepless nights as sales to hit targets

Eve Sleep cut its losses by 50 per cent in the first half of the year but warned investors that the company expects to miss its annual sales targets.

The direct-to-consumer mattress group reported a 50 per cent fall in losses to £5.9 million in the six months to June 30 after it focused on its core markets in the UK, Ireland and France. Group underlying revenue fell by 8 per cent to £12.9 million after a 29 per cent sales slump in France.

The company was launched on Valentine’s Day 2015 with what it claims are the “world’s most comfortable mattresses”. Customers order online and receive their mattress in a compact box. Its prices for a single start at £299, rising to £899 for an “emperor” and customers are offered 100-night trials. It also sells bed frames, duvets and bed linen.

The warning on sales sent its shares tumbling yesterday, down 1¼p, or 14.2 per cent, to 7½p giving it a market value of £19.7 million. This compares with an issue price of 101p and a value of £140 million at its float on London’s junior Aim market in May 2017.

The sharp fall in the share price was also a blow to Neil Woodford, the fund manager who has been a long-term backer of the company with almost a third of the stock. The Equity Income Fund run by Mr Woodford’s firm has been frozen for an indefinite period to stop it being overwhelmed by withdrawals by investors concerned by its poor performance.

Last July Eve Sleep parted ways with Jas Bagniewski, the co-founder and former chief executive, who celebrated the company’s flotation by adding the word “pirate” to his already heavily tattooed forearms to represent “freedom and doing things your way”.

Eve Sleep said Mr Bagniewski was leaving by mutual agreement, adding that management had made “some strategic mis-steps, underestimating what is required to develop a meaningful footprint across continental Europe, while losing focus on creating an aspirational sleep brand in its core market”.

Mr Bagniewski was replaced as chief executive by James Sturrock, who joined in September last year. Mr Sturrock said yesterday he was pleased with financial progress in the first half, despite “substantial retail headwinds” and the competitive nature of the category.

Asos issues loses a quarter of its value overnight as sales plummet

Asos lost almost a quarter of its value yesterday after a bungled warehouse overhaul knocked the online retailer’s sales growth off course and prompted its third profit warning in a year.

Investors fear one of the brightest names in retail is coming under intense pressure from rivals while its investment-hungry business model stumbles.

Asos was founded in 2000 by Nick Robertson, 51, grandson of the founder of fashion label Austin Reed, and his brother Nigel.

It listed on Aim in 2001 at 20p a share and enjoyed an explosion in sales and value as it cornered the fast-fashion market. It has 18.4 million customers, more than a billion visits to its website and employs about 4,400 people.

Yesterday’s warning sent the shares down by 636p, or 23.2 per cent, to £21.07, meaning the company’s value has fallen by 65 per cent this year.

Investors appeared to be unmoved by the chairman Adam Crozier’s attempt to support the business by buying £100,000 worth of shares.

Asos said that its pre-tax profit will now be about £30 million to £35 million this year, £20 million less than analysts expected. Total sales grew 12 per cent to £919.8 million in the four months to June 30, far below its typical growth rate of 25 per cent.

The company blamed a disastrous IT upgrade at its Berlin warehouse which meant its automated software couldn’t cope with the volume of returned clothes. This resulted in stock clogging up its supply chain, a shortage of goods and customers not being able to buy what they wanted from its website. Nick Beighton, the chief executive, said: “The European customer experience has not been as good as it once was or should be”.

He said the problems should be fixed by September, although analysts at Investec warned that if they remained by November’s peak trading during Black Friday the company would face “calls for management changes and further severe downgrades”.

Asos’s US ambitions have been hampered as its Atlanta warehouse has only been able to stock half the fashion ranges the retailer sells in the UK after third-party brands ran into border control difficulties.

US customs require extra details about the chemical composition of clothes and manufacturer documentation, which a clutch of smaller brands did not have the resources to handle.

Mr Beighton, 50, said there wasn’t an issue with customer demand and highlighted that the number of visits to the website had grown by almost a fifth, but order volumes lagged at 11 per cent.

“In any business of scale there is complexity, it’s unavoidable,” he added. “We are turning from a UK-centric seller into a local international operator and that requires proper muscle and infrastructure to deliver.”

The collapse in the share price means that Asos is worth £1.7 billion, significantly less than its smaller rival Boohoo’s £2.4 billion market value. Boohoo made sales of £856.9 million compared with its rival’s £2.4 billion revenue.