Buying Investment Property Comparative Market Analysis in Real Estate: The Basics by Eman Hamed April 19, 2018April 15, 2018 by Eman Hamed April 19, 2018April 15, 2018 When starting a real estate investing career, one term that you will definitely come across is real estate comparative market analysis (CMA). In simple words, a comparative market analysis is a process of determining the value of the investment property by comparing it to other similar investment properties which were recently sold in the same location or housing market. Comparative Market Analysis – Benefits Performing a comparative market analysis is a crucial starting point for any real estate investor, whether he/she is selling or buying an income property. The housing market is always changing; the value of an investment property purchased years ago is not the same today. If your neighbor sold his house for $400k, this doesn’t mean that yours must worth the same. The only way of finding out how much an income property is worth is through a comparative market analysis. Sellers need to know the value of an investment property to ensure they don’t fall into one of these pitfalls: pricing an income property too high and not finding a buyer, or pricing the investment property too low and missing out on a good return on investment. As for buyers, they need to know the value of an investment property to avoid overpaying for it and missing out on other great investments. Related: Buying and Selling An Investment Property: Do’s and Don’ts Comparative Market Analysis – How to Perform It Step 1: Analyze the Investment Property Several features of the income property should be taken into consideration when you perform comparative market analysis, and the main one is its square footage. Other characteristics include the number of bedrooms and bathrooms, the floors, and the age of the target investment property. Step 2: Find Comparable Properties The next step in performing the comparative market analysis is to find a number of similar, recently sold investment properties that share the same characteristics as your target property in the same area. Find 3-5 comparable properties, which were sold within the past 3-6 months and are within a radius of 1-3 miles from your investment property. Property investors find real estate comps in current running listings, pending listings, sold listings, and expired listings. Related: How to Easily Find Real Estate Comps Step 3: Compare the Properties The main method for calculating property values is the price per square foot. To estimate this, property investors take the selling price of the investment property and divide it by its square footage. Repeat this step for real estate comps and then take the sum of each property’s price per square foot and divide it by the number of properties to estimate the average price per square foot for the comparable properties. The last step to performing a comparative market analysis is to multiply the square footage of the target investment property by the calculated average price per square foot to estimate its market value. Mashvisor provides property investors with the best real estate investing tools that make performing a comparative market analysis an easy process. Click here to start analyzing investment properties throughout the US housing market! Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0 FacebookTwitterGoogle +PinterestLinkedin Eman Hamed Eman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. Previous Post Learn Here How to Invest for Cash Flow in Real Estate Next Post How to Turn a Negative Cash Flow Rental Property into a Positive Cash Flow Rental Property Related Posts How Do House Price Trends Look Like at the Beginning of 2018 in the US Real Estate Market? How to Get Your Finances in Order Before Buying an Investment Property How to Buy a Foreclosure as an Investment Property How to Find Good Real Estate Wholesale Deals How to Find Investment Property for Sale Out of State How to Calculate ROI on Rental Property: The 2022 Guide Use an Investment Property Calculator and Become a Better Real Estate Investor in 2018 Learn How to Choose the Best Vacation Rentals for a High ROI Should You Pay Off Your Mortgage or Invest in Rental Property? How to Find the Best Cities to Invest in Real Estate in 2021 4 Best Places for Vacation Rentals in the US Real Estate Market 2018 Investing in Multi Family Homes in Los Angeles vs. Long Beach: Which Option Should You Go For? Leave a Comment Cancel Reply Save my name, email, and website in this browser for the next time I comment.