Real estate investing is a business the core of which is buying investment properties and selling investment properties at the right time, for the right price, in the right place. No real estate investor can succeed and make a fortune without mastering the skills of buying properties and selling properties. One of the most important factors in these real estate transactions is buying and selling for the right price. Thus, a real estate investor has to become an expert on acquiring the current market value of a property in any housing market, at any point in time. Wondering how you do that? Through real estate comps. So, essentially, an investor has to learn how to find real estate comps in order to succeed in the exciting world of real estate investments.
What Do Real Estate Comps Mean?
Real estate comps are the short for real estate comparables. Real estate comparables, on the other hand, are properties which are as similar to your property as possible. Factors which you need to consider to find real estate comps include:
- Property type: single family property, multi family property, townhouse, condo, apartment, etc.
- Square footage
- Age
- Number of floors
- Numbers of bedrooms
- Number of bathrooms
- Other rooms
- Amenities: heating system, cooling system, etc.
- Other features: balconies, verandas, roof, garden, swimming pool, garage, fireplace, etc.
- Land area
Related: How To Do Investment Property Analysis
Why Are Real Estate Comps So Important?
If you are a beginner real estate investor, you might be still wondering why it is so crucially important to learn how to find real estate comps in the best possible way in order to succeed in the business. As we said, to find real estate comps is needed to determine the current market value of your home. To know the current market value of a property is important:
- When you want to sell your investment property: You should make sure not to overprice or underprice your investment property for sale when you place it on the market.
- When you want to buy an income property: You should make sure you don’t overpay when you consider buying investment properties for sale.
- When you want to rent out your income property: How much you can charge for your rental property is partially determined by the market value of your investment property.
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How Do You Find Real Estate Comps?
Now that we have established what real estate comparables are and why they are so important in real estate investing, we arrive at the core of this article: How to find real estate comps. There are 3 most common ways to find real estate comps, and we will look at them in detail below:
1. Conducting Real Estate Market Analysis
The traditional way to find real estate comps which real estate investors have been using for decades is to perform a comparative market analysis (CMA). CMA is a real estate market analysis which serves as a tool for determining the market value of a real estate property.
Related: How To Perform A Real Estate Market Analysis
To perform proper CMA, first you have to do investment property analysis of the home whose current market value you want to determine. You need this step in order to know exactly what real estate property you have under question in order to find real estate comps in the most precise and accurate manner. Then, you need to identify 3 comparable recently sold properties in the same area – these are your real estate comparables. To find comparable properties, you have to look at all the features of the investment property listed above (property type, square footage, etc.). Recently sold properties means sales in the past 3 months, but it depends on the specific dynamics of the local housing market. The same area refers to real estate properties within a radius of 1 to 3 miles from your target property after you make sure that there are no major differences within this radius.
To find real estate comps successfully, you have to aim for properties that are as similar and as close to your own investment property as possible.
2. Getting a Home Appraisal
The second way to find real estate comps is to hire a professional real estate appraiser. This is a real estate professional authorized to valuate real estate properties. Hiring a home appraiser has three major benefits. First, this real estate expert will give you a very precise estimate of your home’s value at the market at the moment. Second, you don’t have to waste time and efforts doing the work needed to find real estate comps yourself. Third, the value which a real estate appraiser gives you is official and can be used for getting a mortgage, let’s say.
However, a real estate investor should consider the fact that to find real estate comps through getting a home appraisal costs money. If that’s your only option, paying for a home appraiser might be worth the price because you would get an accurate market value of your property without spending days or maybe even weeks looking for real estate comps on your own.
But there is another way to find real estate comps, owing to the recent state of technology development in the world of real estate investing.
3. Using Mashvisor
If you don’t want to waste your time and money on a real estate market analysis or to pay a home appraiser, you can use Mashvisor to find real estate comps in your local housing market in an efficient and timely manner. To find real estate comps, Mashvisor allows real estate investors to conduct neighborhood analysis, which greatly facilitates the process of buying investment properties close to home or out of state. You can find real estate comps in several neighborhoods within a city to decide which neighborhood is the best for your investment goals. After you choose a neighborhood, you can look at specific investment properties for sale there to find real estate comps. You can filter your property search by number of bedrooms, number of bathrooms, age, square footage, property type, property status, budget, cash on cash return, and cap rate. These filters will assure that your real estate comps are as accurate as possible.
Related: How to Easily Find Real Estate Comps
Another benefit of using Mashvisor to find real estate comps is that your real estate comps will be separated by your preferred rental strategy: traditional and Airbnb real estate comps. The traditional rental strategy and the Airbnb rental strategy yield very different profitability results, so it is important to get both sets of real estate comps to decide on the optimal strategy in your particular case. The website even has its own Airbnb calculator making it easier for those who want to start an Airbnb business.
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As a real estate investor, you have to be able to perform CMA on your own. There are also cases when you will have to resort to hiring a real estate appraiser, such as when you want to get a mortgage as a method of financing rental properties. However, when you just want to find real estate comps to know how much you should be able to pay for an income property in a specific location, to know how much rent to ask for, to know how much to sell your investment property for, or to know how much to pay for an investment property for sale, just use Mashvisor. Mashvisor’s investment property calculator will save you lots of time and efforts by eliminating the need to search for real estate comps by yourself.