When it comes to buying an investment property, the mantra for every successful investor is always “Location, location, location”. Whether you want to invest in Airbnb or traditional rentals, location is the most crucial factor for profitability. Therefore, it’s important for real estate investors to learn how to do a real estate market analysis before buying an investment property.
In this article, we’ll discuss how to quickly and efficiently do a market analysis using 3 key tools. But before we dive into that, let’s first define what real estate market analysis means.
What Is a Market Analysis in Real Estate and Why Is It Important?
Market analysis in real estate is basically the process of gaining an in-depth understanding of a real estate market to determine if it’s a good fit for an investment property. As a real estate investor, you should never purchase an investment property without asking yourself “How is the housing market performing?”
Real estate market analysis is the most crucial element in evaluating an investment property for sale. It is the basis for every real estate metric or calculation for return on investment used to analyze the viability of an income property. Although the future is never certain, an understanding of the condition of the US real estate market today and how it is likely to change over time will help you make the best, informed guess about future performance. Basically, a detailed market analysis will provide you with the real estate information you need to make a smart investment decision based on reliable data and analytics.
However, researching real estate trends the traditional way and organizing investment analysis spreadsheets to do real estate calculations is a complex and time-consuming process that is often discouraging for beginner investors and even for those with decades of experience in property investment. It can take you weeks or even months to complete this process. Obviously, you are likely to lose out on a lucrative investment opportunity if you take this long to acquire the information that you need to make a positive cash flow investment decision. That’s why you need real estate investment software tools like Mashvisor.
If you’re looking to invest in the US housing market right now, the best way to conduct your real estate market analysis is to use Mashvisor’s real estate investment tools. With Mashvisor’s tools, you can conduct an in-depth market analysis in a matter of minutes regardless of your experience in real estate.
How to Do Real Estate Market Analysis Using Mashvisor’s Tools
Through the Mashvisor tools, you can access a range of real estate information on any market in the US. Mashvisor gathers real estate data on the US housing market from a number of reliable sources such as the MLS, Zillow, Redfin, and Airbnb. It then uses the power of AI and machine-learning algorithms to analyze this data in order to provide real estate investors with accurate data real estate comps, rental comps, predictive analytics, and investing insights.
Here are the Mashvisor tools to use for your market analysis:
1. Mashvisor’s Real Estate Blog
To find the best real estate investments, you need to search for real estate listings in the best place to buy investment property. But how do you find this market? While monitoring the housing market trends will give you insight into the best markets, you should look into comprehensive, actual real estate data.
One way to easily find the best real estate markets is to use Mashvisor’s real estate blog. Mashvisor provides a variety of city-specific blogs covering real estate market news, market trends, and performance data for the best places to invest in real estate in the US housing market.
2. Mashvisor’s Real Estate Heatmap
As a real estate investor, you should combine the city-level real estate market analysis with a neighborhood analysis. While the overall market may be strong, the investment potential of different neighborhoods in the city may differ considerably. Acquiring an income property for sale in the wrong neighborhood can result in poor rental income and a decrease in market value over time.
Therefore, before you begin looking for an investment property to purchase, you need to compare data on multiple neighborhoods in the city in order to find the best. If you already have a neighborhood in mind, you need the reassurance of the investment potential before you invest there.
With Mashvisor’s real estate heatmap, you will be able to determine the most suitable neighborhood for your investment goals using predictive analytics. You don’t need to drive around the neighborhoods or use manual comps. You simply enter the name of the city of your choice into Mashvisor’s real estate search engine and you’ll be able to access a map of all the neighborhoods in the city. This tool uses different color codes to provide a visual representation of neighborhood-level real estate data on a map.
You will be able to easily compare multiple neighborhoods in the city based on the following filters:
- Listing price
- Traditional rental income
- Airbnb rental income
- Traditional cash on cash return
- Airbnb cash on cash return
- Airbnb occupancy rate
Below you can see a real estate market analysis example conducted by the Mashvisor heatmap based on property listing prices:
Moreover, by hovering over a neighborhood in the city, you will get brief data for that neighborhood. This includes the Mashmeter score, median price, Airbnb and traditional cash on cash return, and Airbnb and traditional cap rate.
3. Mashvisor’s Investment Property Calculator
In-Depth Neighborhood Analysis
The real estate heatmap available on the Mashvisor real estate investing platform helps you do a quick real estate market analysis to identify the top-performing neighborhoods in your city of choice based on a few crucial real estate metrics. With this tool, you will be able to identify one or two neighborhoods that are affordable and good for investing in traditional or Airbnb rental properties. However, you will need more neighborhood data before you make your final decision on which neighborhood to invest in. This is where Mashvisor’s investment property calculator comes into play.
When you click the name of the neighborhood you want to analyze, you will be taken to the Neighborhood Analytics Page. Here, you’ll be able to access various statistics and information showing the real estate trends in the neighborhood.
- Mashmeter Score
- Median house price
- Price per square foot
- Rental income (Airbnb and traditional)
- Cash on cash return (Airbnb and traditional)
- Airbnb occupancy rate
- Walk Score
- Optimal rental strategy (Airbnb vs. traditional renting)
- Number of properties (real estate listings, Airbnb rentals, and traditional rentals)
- Rental analysis (list of all properties in the neighborhood with their historical rental income)
- Optimal property type
- Optimal number of bedrooms
- Neighborhood comps
Real Estate Comps and Rental Comps
At the property level, Mashvisor’s rental property calculator can help you do a real estate market analysis to find real estate comps and rental comps in just a few clicks.
Real Estate Comps
Comparative market analysis in real estate is important before buying an investment property. This involves estimating real estate prices based on recent real estate sales of similar properties in the immediate area (real estate comps). This will help you identify a good deal and set competitive offers. If you don’t know how to do a comparative market analysis, you may end up paying more than what the property is actually worth.
With Mashvisor’s investment property calculator, you can conduct a comparative market analysis in just a matter of minutes. For each rental property on the platform or an off market rental property for sale whose address you enter, you can access a list of real estate comps.
You will access rental comp data such as:
- Sale price
- Sale date
- Days on the market
- Price per square foot
You also need to do a rental market analysis to determine how much to charge for rent. Charging higher rent doesn’t always translate into higher gross rental income and a higher rate of return. If you want the most qualified tenants while maximizing your gross rental income and minimizing vacancy, you want your rental rate to be similar to what other landlords in the area are currently charging for comparable rental listings.
There are several resources you can use to find rental comps such as local listing agents, landlords, and property management companies. However, if you want to find rental comps easy and fast on your own, use Mashvisor’s rental property calculator. For each rental property you analyze, the calculator provides a list of Airbnb and traditional rental comps.
For each rental comp, you’ll see the following data
- Traditional monthly rate
- Airbnb daily rate and Airbnb income
- Percentage of similarity
- Number of bedrooms
- Number of bathrooms
- Airbnb rating and reviews
The Bottom Line
The profitability of an investment property is largely a result of its location. Therefore, doing a thorough real estate market analysis is essential before making a purchase. Real estate information gathered through market analysis will help you identify lucrative investment opportunities and guide your decision-making. If you want to do your market analysis quickly and efficiently, be sure to use Mashvisor’s real estate investment tools.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.