Why You Should Care About The Liquidity Score

You are a property investor. You’ve found a hot property on the market that’s listed for 20% below its “fair” market value.

Is it a good investment? Should you buy it hastily before it gets snatched by your competitors?

If you just think about the price, then the question pretty much answers itself. However, the astute investor would be as concerned about how long it would take to resell this property. In other words, how “liquid” the property might be.

The challenge here is that there is no universally agreed method to calculate the liquidity of properties. A bit of research reveals that the current methods are very subjective at best, if not chaotic.

At Rexsmart, we have taken a keen interest in understanding the liquidity, and formulating an objective, transparent and consistent way to calculate it.

The process takes multiple factors into account, including the estimated market value (thanks to AccuVal, our AI valuation tool). We then look into what has been sold within a mile in the past 5 years. For each sold property, we assess the relevance based on how similar each sold property to the one being assessed. Specifically, we look into the type (house or flat), the size, the distance and when it was sold.

We also recognise that not all areas are equal, so we also assess the liquidity of the area and combine the area score with the score of the property. This means two identical properties, one in Manchester Piccadilly and the other in a rural town will get a very different scores for example.

What are your thoughts? Have you ever considered the liquidity score in your investment decisions?

Check out your property’s liquidity score!

01-02-2024