You’ve found a great property that has bags of potential. But before you invest, it’s important first to establish what the property is really worth and whether the asking price is good value.
If you can get the property at the right price you could be onto a winner. But if you pay over the odds, it may no longer make financial sense to invest.
This is where data on Rightmove becomes invaluable. Rightmove makes it easy for investors to view asking prices and sold prices for similar properties in the area. But which figures are most reliable when estimating a property’s value?
In this article, we’ll explain what Rightmove asking prices and sold prices can tell you, and how investors can use them to understand the local property market, establish a realistic property value, and identify properties with investment potential.
Why does property value matter to investors?
If you don’t know a property’s realistic market value, you’re essentially investing blindly. It’s difficult to gauge how profitable a property could be if you don’t know what it’s realistically worth.
A property’s purchase price feeds into almost every important investment calculation. Even if there’s strong rental demand and good growth potential, an investment can still deliver poor returns if you’ve paid too much for it.
The amount you pay for a property will affect:
- Your gross rental yield.
- The amount of capital you need upfront.
- The size of loan you require.
- Your monthly cash flow.
- Your overall return on investment.
- Your potential return from capital growth.
- Refurbishment potential/ROI
Accurately estimating a property’s value can help you determine whether an asking price is reasonable and, if not, establish a realistic price range. From there, you can work out the maximum amount you’re willing to pay while still achieving your target return.
Ultimately, once you’ve got an accurate estimate of how much a property is actually worth, you can decide whether the investment still has potential and reduce the risk of overpaying or taking on an unnecessary financial risk.
What can Rightmove asking prices tell property investors?
Property portals like Rightmove and Zoopla are among the first places that property investors turn when researching a potential new investment.
Both platforms can provide investors with access to a wealth of useful property market information, including current listings and historic sold-price data.
If you think you’ve found a good investment opportunity and want to check whether its asking price is reasonable, comparing it with similar properties currently advertised in the area is a useful starting point.
The asking price is the price a seller is currently advertising their property for. Asking price data is useful for building a picture of what’s happening in the market right now.
Browsing asking prices for comparable properties can help you to build a picture of the current market conditions and seller expectations in your target area. It can also give you some idea about where a property’s asking price sits within the current price range for similar properties and whether it’s priced fairly.
Monitoring asking prices over time will help you spot trends, such as rising or falling prices, properties being reduced, or certain types of property taking longer to sell.
Why can asking prices be misleading?
While Rightmove asking prices are useful for assessing current market conditions, it’s important to remember that they only represent what the seller hopes to sell the property for which is not necessarily the same as what it is actually worth.
Sellers can set whatever asking price they want and often set it above the property’s value to leave room for negotiation. Properties can also be overpriced if the seller has unrealistic expectations or if the market has changed during the time that the property has been listed.
Equally, if there are several people interested in a property, a bidding war could begin, and the eventual sale price could end up higher than the listed asking price.
For these reasons, investors shouldn’t use asking prices as evidence of market value. Instead, they should use them to understand current seller expectations and market conditions.
Does a property price reduction mean you’ve found a bargain?
If a property’s asking price has recently been reduced, it doesn’t necessarily mean that you’ve found yourself a bargain. The property could have simply been overpriced to begin with.
To check whether the discount really represents a saving, compare the price to recent sold prices for comparable properties on Rightmove. If the seller has knocked £20k off but it’s still priced higher than other similar properties in the area, it may not be such a bargain after all.
Sellers with properties that have undergone one or more reductions or been sitting on the market for a very long time may be open to negotiating the asking price. However, make sure you always thoroughly investigate why the property hasn’t yet sold. It could simply be down to an unrealistic asking price, or there could be underlying issues with the property that have put other buyers off.
Why should investors look at property sold price data?
While asking prices on Rightmove provide a good snapshot of the current market, sold price data provides investors with much stronger evidence of a property’s market value. Rather than telling you what price sellers hope to achieve, sold prices tell you what buyers actually paid for a property.
However, historic sold prices are only useful if the properties are genuinely comparable to the property you’re considering investing in. Two properties on the same street with the same number of bedrooms could still have very different values.
When researching sold prices, try to find properties that are similar in terms of:
- Location.
- Property type
- Size
- Age
- Condition
- Parking
- Garden
- Date of sale
In addition to Rightmove, investors can also use HM Land Registry to search for sold price data.
Or, if you want to save time, PaTMa’s Deal Finder tool can provide local property data and purchase and rental comparisons all in one place. Deal Finder helps you to quickly and easily build a clear picture of a property’s value and investment potential, helping you to make more informed investment decisions.
Are there any limitations to using property sold price data?
Estimating a property’s value using Rightmove’s sold price data is a great place to start, but it does still have some limitations.
The main issue is that sold prices are historic and so may not accurately reflect current market conditions. Sometimes, there’s a long gap between an offer being accepted and the sale completing, which can make the data more outdated than it appears.
Investors using sold prices to value potential new investments should make sure they compare several recent and genuinely comparable properties and avoid relying too heavily on a single transaction. Taking current asking prices into account alongside sold prices can help investors build a more complete picture of current market conditions.
Asking prices vs sold prices: which should investors use?
As we’ve seen, both asking prices and sold prices can provide investors with useful insights. However, the two prices tell investors different things, and they’re most useful when considered together rather than relying solely on one or the other.
The asking price can help you to understand today’s market, while the sold price tells you how much buyers have actually been willing to pay for comparable properties recently.
Researching both sold and asking prices can help investors to build a more complete picture of both how much comparable properties have been selling for and what direction the market is heading in today.
Don’t forget to also research comparable rental properties
Of course, if you’re buying an investment property to add to a rental portfolio, you also need to know how much rent the property could realistically achieve and Rightmove can help with this too!
Take care to ensure the properties you are comparing it to are genuinely similar. Pay particular attention to factors like location, size, condition, features, and property type, which can all significantly impact rent.
Once you have realistic estimates for both the property’s potential purchase price and rental income, you can use these figures to calculate important metrics like gross rental yield and projected cash flow.
This will give you a much clearer idea about whether the property represents a genuinely profitable opportunity and is the right fit for your portfolio.
How to assess whether a property is worth investing in (step by step)
If you think you’ve stumbled upon a great property, it can be tempting to snap it up before someone else does but these things should never be rushed. Before making an offer, you should assess the property’s market value, achievable rent, costs and potential returns to make sure you’re not making an expensive mistake! Doing your research and running the numbers first will help you to build a profitable portfolio that sets you up for long-term success.
Step 1: Research market trends
Taking a deep dive into how the wider property market in your target area is performing is a great starting point. Are property prices rising, falling, or relatively stable? Is rental demand strong? If you discover anything off-putting at this point, it can save you a lot of wasted time. Otherwise, what you learn now will provide useful context for the rest of your analysis.
Step 2: Compare asking prices on Rightmove
Next, see how the property’s asking price compares with comparable properties listed on Rightmove. This should give you some idea about where it sits within the current market and whether the seller’s expectations are realistic.
If comparable properties listed at the same price or higher have been on the market for a long time, or if they have been reduced in price, there may be room for negotiation.
PaTMa Deal Finder can also help you identify potential opportunities by filtering for properties that have been on the market for longer or have been relisted.
Step 3: Look at recent sold prices on Rightmove
Now compare the property’s asking price with recent sold prices for comparable properties on Rightmove. This provides much stronger evidence of market value. If most properties have sold for less, then the property you’re considering could have been overvalued.
Rather than trying to identify one definitive market value, use several recent comparable sales to establish a realistic price range.
Step 4: Assess the property’s characteristics
Be aware that it’s difficult to find genuinely comparable properties, as many different factors could increase or decrease a property’s value.
Assess the property in question’s strengths and weaknesses and think about how they could affect its value. Factors like property size, condition, exact location, garden, garage, and parking will all impact how much it's worth.
Step 5: Adjust your price range accordingly
Next, adjust your price range to reflect the characteristics you identified in the step above. If the comparable properties all offered off-road parking but this one doesn’t, for example, this might push it slightly lower down your price range.
Also consider any renovations that may be required before you could rent the property out. If it needs a new kitchen, for example, you should factor these costs into your calculations when deciding how much you can afford to offer.
Step 6: Research achievable rent
Now use Rightmove to research how much landlords are charging in rent for comparable properties.
Step 7: Carry out a detailed financial analysis
Now you can use your figures to calculate the property’s expected rental yield and cash flow. Don’t forget to stress-test the figures to make sure the investment would still be viable if your costs increased.
Specialist property investment software like PaTMa’s Deal Finder can significantly speed up this stage of the process. Deal Finder lets you enter a purchase price, mortgage, and all ongoing expenses and then creates a detailed financial forecast, helping you to assess how the investment could perform before you take the plunge.
Step 8: Determine your maximum offer
Phew! If after all that, you still think it’s the right opportunity for you, it’s time to work out the maximum price you’re willing to pay for the property.
Rather than letting the asking price dictate your offer, work backwards from the return you want to achieve. This will give you a clear maximum purchase price based on your own investment goals and helps you to avoid getting carried away during negotiations.
Other important considerations
Running the figures and making sure the property has the potential to generate a good return is very important, but it’s not the only thing you need to consider.
Make sure you’ve considered all other factors that could affect the property’s long-term performance, including:
- Local rental demand.
- Planned developments.
- Transport links.
- Employment opportunities.
- Any relevant legal or licensing requirements.
- The property’s condition.
Find and analyse your next investment with PaTMa’s Deal Finder
Take the guesswork out of property investment and start investing with confidence with the help of PaTMa’s Deal Finder tool.
Researching potential investments manually can be very time-consuming and can increase the risk of human error. When you use PaTMa's Deal Finder, you can bring key property data, comparable properties and investment calculations together in one place, significantly reducing the amount of manual research and number-crunching required. No more hopping between different property portals or poring over spreadsheets and complicated formulas.
Deal Finder helps investors to:
- Access purchase and rental comparisons
- Explore detailed local property data.
- Create customised financial forecasts based on your figures.
Ready to start making more informed investment decisions? Book a free online demo or start your free trial today to learn more about how Deal Finder works and what it can do.
