If you are reading this blog, you probably have the dilemma of where to invest your financial assets. Typically, there are two main options to choose from. You can either invest in stocks or in real estate. This is a tough decision to make for every future investor. In any case, before putting your money in one of the strategies, you need to conduct some analysis: real estate market analysis or stock market analysis. In both cases you will end up researching the market, because let us be clear, no one wants to lose his/her money. So, in this blog we will explain the similarities and differences of real estate market analysis and market stock analysis. Keep on reading to find out more!
#1 What Is Real Estate Market Analysis?
Real estate market analysis is usually the first step a real estate investor should make before financing a property. This analysis explores the current condition of the chosen local market – buyer’s market or seller’s market. Additionally, it takes into consideration the supply of and demand for properties in the area. Moreover, this analysis estimates your investment property’s value based on the market value of recently sold properties with the same features, or real estate comps. These real estate comps should be in the same geographical area, approximately three miles away from the real estate property in question. For the best market research, you should compare as many properties as possible, but certainly more than three.
Related: Real Estate Market Analysis in 6 Simple Steps
#2 The Investment Property Calculator
Investing in real estate requires that the real estate investor possesses specific knowledge about the real estate market. As analysis requires a lot of time and effort to perform manually, real estate investors use the investment property calculator. And here is why.
The investment property calculator provides you with quick and accurate calculations of cap rate, cash on cash return, etc. Mashvisor’s investment property calculator, additionally, reveals information from comparative and predictive analytics, based on similar real estate investment properties in the neighborhood. Further, Mashvisor’s investment property calculator can show you the potential future trends and present you with detailed market research on a specific property as well as its neighborhood. Moreover, it can suggest the best investment strategy for a particular neighborhood as well as provide you with a list of low risk investments for a particular location. Simply put, using the tool will help you to start making money faster and with an ease.
Related: This Is How the Investment Property Calculator Eliminates the Need for Real Estate Market Analysis
#2 What Is Analysis of Stock Market?
Well, the main idea behind analysis of stock market is that it helps you with evaluating the market. This is extremely useful for predicting the future of the market actions and providing with you with some in depth information. Typically, there are two ways in which you can conduct the analysis of stock market. These are, namely:
- Fundamental analysis of stock market
Such type of analysis of stock market aims to assess the value of the company. A fundamental analyst will pay close attention to the balance sheet, the profit and loss statement, and other data helpful in predicting the company’s future. To put it differently, fundamental analysis of stock market is all about using real data to estimate a stock’s value. This method uses revenues, profit margins, return on equity, and other data in order to evaluate a company’s value and its potential for future growth.
- Technical analysis of stock market
Contrasting to fundamental analysis of stock market, technical analysis has absolutely nothing in common with the financial performance of the company. The main objective of an analyst is simply to study the trend in the share prices. The essential theory is that the market price is due to the level of supply of and demand for the stock, which, therefore, has an influence on the value of the company. This method truly believes that price trends of the past are a good indicator of future performance.
Consequently, instead of evaluating the health of the company by fully trusting its financial statements like it is performed in fundamental analysis, technical analysis relies on the market trends.
#3 What Are the Differences Between Real Estate Market Analysis and Analysis of Stock Market?
Before getting to understand the dissimilarities of the two analysis, we need to understand the difference between the markets. One of the main differences between the real estate market and the stock market is the liquidity. As a real estate investor, you should know that you cannot just decide that tomorrow you will sell your investment property. This is not how it works in real estate, even if you think that you have the best investment strategy. However, with stocks you can easily cash out the next day. This, of course, brings along same advantages and disadvantages. So, what is the benefit of the fact that you cannot cash out immediately when investing in real estate? People are emotional, and when your goal is to get rich, many investors tend to do opposite to what is smart. For example, when the market crashes, beginner real estate investors start trying to sell their investment properties. Instead, a real estate investor should start buying properties at a lower price. When the market heals, you as a real estate investor would be able to sell for a higher price, and that is the right track for making money.
This is why investors take completely different approaches when performing one of these analyses. One of them requires quick action and evaluation. The other forms on the basis of patience and analyzing the data in-depth.
#4 What Are the Similarities of Real Estate Market Analysis and Analysis of Stock Market?
The golden rule which every investor should follow is to conduct market analysis before putting his/her money. This rule applies regardless of whether you are planning on investing in real estate or investing in stocks. Except the need of analysis, there are other similarities between real estate market analysis and analysis of stock market. As previously stated, real estate market analysis and stock market analysis are factors based on which investors make decisions. Performing analysis can help you in finding a low risk investment, for instance. The main resemblance between stock market analysis and real estate market analysis is that both forecast an investment’s value. They are predicting the profits by analyzing past, current, and future data.
Related: The Key Benefits of Investing in Real Estate versus Investing in Stocks
Are you interested in learning more about real estate market analysis? Or maybe you are curious about the best tools for conducting real estate market analysis? Then do not waste your time, and check out Mashvisor for more information!