Real Estate Analysis This Is How Not to Do Real Estate Market Analysis by Sylvia Shalhout January 2, 2018February 11, 2019 by Sylvia Shalhout January 2, 2018February 11, 2019 Are you following a guide on how to do real estate market analysis the right away? Sometimes, when real estate investors follow these guides, they veer off track, thinking, why not? How much could tweaking one step of the guide change the result of the real estate market analysis? In reality, these changes can have a major effect on the value you end up with for your investment property. This is why, alongside a guide for real estate market analysis, real estate investors should have some insight into what not to do and why not to do it. With this guide, real estate investors should be fully equipped to perform real estate market analysis with confidence and ease. Related: Beginner’s Guide to Comparative Market Analysis Skipping Investment Property Analysis Real estate investors absolutely need to know their investment property inside and out. How can you start to look for real estate comparables when you don’t know every detail of your own investment property? That’s where investment property analysis comes in. Beyond just knowing the number of bedrooms and bathrooms, you’ll dive into details about the location and the neighborhood as well as the state of the housing market. Besides the qualitative aspects of the investment property, investment property analysis will give you an idea of what the value of the property is. Investment property analysis consists of calculating the return on investment. With this value ready, a real estate market analysis will be easier, because you have a price to start with. The two go hand in hand, and you can’t have real estate market analysis without investment property analysis! Having trouble performing either type of analysis? Use Mashvisor to simplify things. With so many listings as well as an investment property calculator, Mashvisor will help you figure out the return on investment as well as find as many real estate comparables as you need! Related: What are the Advantages of Real Estate Investment Analysis? Ignoring Repairs and Renovations An investment property analysis of your own property will let you know about any repairs you will need to make. Naturally, these repairs will result in appreciation of the value of the investment property. Real estate investors have to have the after-repair value ready when they begin to look for real estate comparables. Otherwise, they’ll be looking for comparables that are lower than the price of their investment property. Renovations of either your own investment property or the real estate comps have to be taken into consideration. For example, if you find a single family home that is identical to your investment property, but the kitchen has been completely remodeled and updated, it will automatically have a higher value than yours. Looking in Completely Different Locations It’s tempting to use real estate comparables from other locations if they match the investment property in every other single way. Because there is so much emphasis on finding real estate comps that are as identical to the investment property as can be, you might think that using ones in different locations is okay. The fact is that location plays a huge role in the value of every investment property. Two seemingly identical properties in two different locations can vary greatly in value. This means taking into account details of location as well when doing a real estate market analysis. Some real estate investors think that because two houses are in the same city, two blocks apart, then they can be used as real estate comparables. But if one is near a noisy railroad track and the other is on a quiet street, then the value is affected for sure. Pay attention to any differences in the location of the investment property and any potential real estate comparables. Related: Location Location Location: What Makes for the Best Place to Invest in Real Estate? Forgetting to Adjust for Differences Maybe you’ve found a single family home that is in the same location as your single family home and shares every other detail with it. However, it has an extra bedroom, but it’s the closest you’ll get to finding a real estate comp for your real estate market analysis. It is acceptable to use this, but only if you make adjustments for the extra room. An extra bedroom can mean thousands of dollars in difference on the value, and you’ll end up overpricing your investment property. Searching Through One Type of Real Estate Listing Real estate experts generally define real estate market analysis as finding the value of an investment property from real estate comps that have been sold recently in the same location. This leads many real estate investors to focus on sold listings. While it’s true that investment properties from sold listings contribute the most to the value of your property, you absolutely cannot ignore other types of real estate listings. This means looking for real estate comps in active listings, pending listings, and even expired listings. Each one adds something to the value of the investment property and is necessary for a complete real estate market analysis. Using Only One Real Estate Comparable Some real estate investors have trouble finding multiple real estate comps and settle for one. It might take longer and require more diligent research, but real estate experts say you should be using at least three to five real estate comparables. In this way, you’ll end up with a range of values to place your investment property in rather than one value to match it with. The value you find from real estate market analysis with multiple real estate comps will ultimately be more accurate. Overestimating or Underestimating Value When you get to the last stage of real estate market analysis, you should have a range of prices. It might be tempting to automatically place your investment property at the top of the range, above all other comparables. You might even be conservative and place it at the bottom, trying to play it safe. What you should be doing is finding the exact place your investment property falls in the range. This means using everything you found in your investment property analysis and comparing it to the properties in the range. Real estate investors shouldn’t be trying to save time while doing real estate market analysis or getting overly creative to the point of making mistakes. You have to follow each step systematically and not take any shortcuts. If you avoid all of the “don’ts” listed here, you should end up with an accurate price for your investment property. This will ensure you don’t overpay as well as guaranteeing you can easily sell your investment property. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL Investment Property AnalysisInvestor ToolsLocationMarket AnalysisReal Estate CompsRenovations 0 FacebookTwitterGoogle +PinterestLinkedin Sylvia Shalhout Sylvia was the Content Marketing Manager at Mashvisor. As a real estate writer, she has been covering topics for the beginner and advanced real estate investor, helping them make smarter decisions as well as real estate agents looking to take their business to the next level. 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