What is a real estate comparative market analysis, and how should you use it when investing in real estate? A real estate comparative market analysis is one of the most important steps that can greatly affect the success rate of your investment.
In fact, without doing a comparative market analysis, you would be basing your investment on faith alone. This, as any experienced real estate investor knows, is not a very wise investment decision.
A comparative market analysis allows the real estate investor to base their decisions on actual data, allowing them to accurately predict the amount of return that they can generate from investing in a property.
So, what are the different aspects of a real estate comparative market analysis? And how can you conduct your own market analysis in order to maximize your profit and make the wisest investment decisions when investing in real estate?
The Two Sides of a Real Estate Comparative Market Analysis
A real estate comparative market analysis is, as the name suggests, an analysis that is based on comparing a number of investment properties within a market to determine the best one for investing.
So, there are two main parts of a real estate comparative market analysis:
- Investment property analysis
- Neighborhood analysis
Investment Property Analysis
The investment property analysis is the process of collecting data on the investment properties within a market in order to analyze them and compare them.
The main metrics that you will need to calculate or obtain about the investment properties include:
- The listing price
- Rental income
- Property’s characteristics (type, age, size, etc.)
- Cap rate
- Cash on cash return
- Occupancy rate
- Cash flow
You can either collect the data on the investment properties from the data sources that are available to you, or you can use online tools and platforms to make the process much easier (as will be shown in more detail below).
The data and metrics that you gather here will be the main aspects that you will use in your comparisons.
Neighborhood Analysis
The neighborhood analysis is the second part of the real estate comparative market analysis, and it is where you will be comparing the properties that you have analyzed in order to identify the best one for investing.
In this stage, you will want to analyze the data that you have gathered so far to calculate the average performance of investment properties in the neighborhood that you want to invest in. Afterwards, you will want to make separate lists to calculate the averages per property type, size, or age in order to identify the property type that is performing above that neighborhood’s average. Finally, you will want to compare all the properties of that type to see which ones are performing best.
Again, you can save a lot of time and effort by using an online tool or platform to help you conduct a real estate comparative market analysis with ease and at a faster speed, such as Mashvisor, which will be explained in more detail below.
Want to skip this lengthy and daunting process? Click here to gain access to a comparative market analysis tool that can turn three months of research into 15 minutes!
Mashvisor: A Real Estate Comparative Market Analysis Tool
By now, you must be thinking – a real estate comparative market analysis sounds like a lot of work!
And you’re absolutely right.
In fact, a comparative market analysis takes an average of three months to complete. That is a lot of time during which the investment property that you’re interested in might get sold to someone else, causing you to lose your chance of investing in it.
To make it all easier and quicker, Mashvisor was developed to allow real estate investors to conduct a real estate comparative market analysis in the matter of minutes instead of months.
Using Mashvisor, you will gain access to a massive number of rental property listings in the United States, complete with their data and analytics.
The analytics provided include all the necessary info for conducting a comparative market analysis, such as pre-calculated projections and metrics for each property’s cap rate, cash on cash return, occupancy rate, and more.
You will also gain access to neighborhood analytics, as well as readily available neighborhood comps and averages for these metrics (cap rate, cash on cash return, occupancy rate, etc.)
Using this data, you will be able to easily export an Excel sheet report for the properties that you’re interested in and for your market or neighborhood of choice. The report can be customized to filter out unwanted property types, or properties that have undesirable projected cap rate, cash on cash return, or occupancy rate, in addition to numerous other customization options to come up with the most relevant comparison based on your investment strategy, goals, and criteria.
But it doesn’t stop there. Using Mashvisor, you will also gain insights and comparisons between the two rental strategies – short-term (Airbnb) rentals and long-term (traditional) rentals.
All of the data and stats provided will include both rental strategies to help you determine the best rental strategy to use for your investment.
Once you’ve chosen one or more properties that you like, you can then go to their analytics page to customize the calculations and obtain the most accurate calculations for the property’s cap rate, cash on cash return, or occupancy rate, all based on your own investment goals and financing method (cash vs. mortgage). You can also download or share an easy-to-read PDF report for each property, which will include all of that property’s data, insights, and stats that you can share with your real estate agent, a family member, or a friend.
Want to start using Mashvisor to find and invest in the most profitable rental property in your market of choice? Click here or use the promo code BLOG15 to sign up for Mashvisor at a 15% discount!
Bottom Line
A real estate comparative market analysis is one of the major obstacles standing in the way of most beginner real estate investors who lack the sufficient knowledge to carry out their own market analysis, causing many prospects to shy away from real estate investing.
However, with the use of a platform like Mashvisor, beginner real estate investors can finally gain an advantage to compete with other, more seasoned real estate investors on an equal and balanced ground.
Heck, even if you want to forego the entire process of conducting a real estate comparative market analysis, one of Mashvisor’s features allows you to get a list of the most profitable and suitable investment properties for you in your market of choice with a single button click. This feature, the Property Finder, utilizes a self-learning AI with unique and accurate algorithms that allow it to analyze you, the investor, and hundreds of thousands of investment properties, and to match you with the investment properties that it finds to be the most suitable for you based on all the data that it has collected.