When investing in property, one of the most overlooked but crucial mindsets you need to adopt is that of a property valuer. While many investors focus solely on yield, capital growth or location, few realise the importance of understanding how a valuer thinks. The bank’s decision to lend, after all, hinges on the property’s valuation and the valuer is risk-averse by nature. If you’re serious about making smart, long-term investments, thinking like a valuer will help you make better decisions and avoid costly mistakes.
A property valuer’s job is to assess the real value of a property, considering everything from its physical condition and location to environmental hazards and market trends. When the bank decides to lend money, they rely heavily on the valuer’s report to determine how much they are willing to risk. This is why understanding what valuers look for is crucial. They are not swayed by market hype or short-term trends; their job is to assess risk and ensure the property is solid for the lender.
If a valuer doesn’t like the look of a property for whatever reason the lender may reduce the loan amount or refuse financing altogether. Therefore, thinking like a valuer can help you avoid red flags that could derail your investment plans.
One of the first things a valuer looks at is environmental hazards. While most buyers are quick to check for issues like flood zones or bushfire risks, other hazards like high-voltage power lines, proximity to substations and land contamination are often overlooked. These factors can significantly reduce a property’s value, making it harder to resell or refinance in the future.
For example, I’ve seen cases where investors bought properties without realising they were near high-voltage power lines, only to discover later that lenders were unwilling to offer mortgage insurance. Without that insurance, the buyer had to cover a higher percentage of the loan (often 20% instead of 5-10%), making the investment less attractive financially. Even worse, properties located near these hazards can be much harder to sell in the future.
The physical characteristics of the land itself also play a significant role in how a property is valued. Ideally, you want a property that sits on flat, rectangular land with good orientation. While these might sound like small details, they have a big impact on valuation. A property on sloping land or irregularly shaped lots may be more challenging to develop or renovate and these challenges will be reflected in the valuer’s assessment.
On top of that, land with undesirable features, such as too many trees or strange dimensions, might look aesthetically pleasing but could reduce the usability of the space. This affects both the immediate value of the property and its long-term potential for growth. Again, it’s something a valuer will notice, and you should too.
Location is often touted as the most important factor in property. While that’s true to some extent, a valuer goes beyond just assessing the suburb. They look at the specific position of the property within that location. For instance, is the property on a main road or in a quieter inside street? Is it close to desirable amenities or overshadowed by industrial zones? A valuer looks at how well the property is situated within its area and how that will affect its appeal and long-term value.
Inside streets often fare better in valuations compared to properties on busy main roads, where traffic, noise and accessibility can reduce buyer interest. In the long run, you’ll want a property that’s not only in a good suburb but also well-positioned within that suburb.
Valuers also consider the broader market demand for the type of property you’re investing in. Banks and valuers are often more conservative with properties like apartments or niche commercial buildings. For example, apartments tend to have a lower loan-to-value ratio (LVR) because they are seen as riskier investments, especially if there is an oversupply in the area.
Similarly, niche commercial properties, like medical practices, petrol stations or retail shops, may only receive a 50% LVR compared to 65% for more versatile commercial properties. Understanding how the bank views these types of properties and the limits they impose can help you avoid surprises when financing your investment.
Most property investors focus heavily on quantitative data—things like vacancy rates, rental yields and price growth. While this data is critical, valuers incorporate qualitative analysis which is equally important but often neglected by investors.
Qualitative factors include everything from the property’s condition and appeal to potential risks like environmental issues and future market demand. For example, trees on the property might seem harmless, but they can affect future development potential and therefore, the valuation. Similarly, the age and condition of the building itself can drastically alter how much a valuer believes the property is worth.
Ultimately, thinking like a valuer allows you to understand the true value and risk profile of a property, beyond just the numbers that look good on paper. Investors who overlook the factors that valuers focus on—environmental hazards, land condition, property orientation and market demand—are more likely to face financing difficulties or losses when trying to sell.
By adopting the valuer’s mindset, you’ll be better equipped to make smarter decisions that will help set you up for the long term.