Investor Blogs What is Market Analysis in Real Estate Investing and How Do You Perform It? by Yoana Leusin March 21, 2018February 15, 2019 by Yoana Leusin March 21, 2018February 15, 2019 If you are a part of the real estate world, sooner or later you will need to conduct market analysis. Here comes the question: “But what is market analysis?” It is also expected that you’ll ask yourself how it can help you to find the best places to invest in real estate. If you want to learn more on the topic, this is the right place for you. Keep on reading in order to learn what is market analysis. Additionally, we will discuss its purpose when buying investment property. #1 What Is Market Analysis? “What is market analysis?” you may ask. Well, as you can imagine, this is a type of analysis regarding the current housing market. Such analysis is also known as comparative market analysis (CMA). It represents the gathering of data about the current housing market and analyzing it. For instance, by conducting the research, we can understand the state of the current housing market- whether it’s a buyer’s market or seller’s market. Moreover, CMA allows the real estate investor to determine the value of a property. This is done by comparing recently sold investment properties similar in features to the one of interest. Such similar investment properties are called real estate comps. In order to get the best results when conducting real estate market analysis for evaluating a property’s market value, it is good to know a couple of things. The real estate comps you use for comparison should be a maximum of 3 miles away from the chosen investment property. However, this is not all! Properties that were sold recently (within 3-6 months) should be the ones you use in the analysis. In addition, to have accurate results, you should analyze more than three investment properties. Do not forget that the real estate comps should have similar characteristics to the property of choice. This means that they should have the same number of bedrooms, bathrooms, living space, etc. Researching the market value of a property can be useful both when selling and buying a property. In the first case, you would know what asking price to establish. In the second, it will help the investor in finding the best real estate investments and not overpaying for their price. Further, such analysis might be helpful in establishing the rental price of your property. Now, can you answer the question: “What is market analysis?” Maybe you want to learn about what is market analysis? You can find more information by reading “How To Perform A Real Estate Market Analysis” #2 Why Should You Conduct Real Estate Market Analysis Before Buying Investment Property? After exploring what is market analysis, it is time to see why it is necessary to conduct real estate market analysis and how it is beneficial. We already mentioned some of the benefits of performing comparative market analysis, but let’s explore them deeper. About the Property Every successful investor knows that performing real estate market analysis helps them in making the best investment decision. This is so because the analysis provides the real estate investor with insightful information about the real estate market. Typically, one of the main goals of conducting comparative market analysis is receiving detailed information about the best real estate investments and/or best places to buy an investment property, etc. By carefully examining the real estate market data, you should be able to find properties with high return on investment, which is important for the growth of your investing business. As already mentioned, CMA can help you with deciding how much rent to charge for your property. This is because the rent usually falls between 0.8% and 1.1% of the property’s value. Thus, by getting to know the market value of your property, you can quickly compute the appropriate monthly rental price. Another reason why you should conduct market analysis is to be the one who gets the best deals in the current housing market. What do I mean by that? Well, knowing the investment property’s value, you will be able to negotiate with the seller and not overpay for your investment. Sure enough, fewer costs result in higher profitability. If you want to know how to find the best real estate investments, make sure to read “What Types of Property Make for The Best Real Estate Investments?” About the Market It is also important to pay attention to the state of the market in order to manage your real estate investing business in the best way possible. Real estate market analysis can help with that as well by revealing if it is currently a seller’s market or buyer’s market. In the state of a seller’s market, there is a high demand for buying properties and fewer homes for sale in the real estate market. This is the perfect time to list your investment property on the market. In the state of a buyer’s market, the real estate market favors the buyers and the property prices go down. This is because the supply of property has increased, while the demand has decreased. This is the golden opportunity to buy an investment property. If you want to learn more about the topic, make sure to read “Is the 2018 US Housing Market a Seller’s Market or a Buyer’s Market?” #3 Things to Consider When Conducting Real Estate Market Analysis So far, we have covered what is market analysis as well as what is market analysis useful for. Now, it is time to see what to consider when performing comparative market analysis to achieve the most efficient results. There are two main things: finding the best neighborhood and property as well as what to do when finally purchasing the investment property. Selecting the Best Neighborhood and the Best Property Every real estate investor knows the golden rule in real estate, which is: “location, location, location”. That is why in order to succeed you need to find the best neighborhood for your future investment. Still, many beginner real estate investors ask the same question: “what are the best places to invest in real estate?”. Moreover, every real estate investor wants to know how to find the best places to buy an investment property. Let me answer the question: “what are the best places to buy an investment property?”. Your property should be located in a very attractive area to generate a steady rental income. Moreover, for your investment property to be desirable in the current housing market, it should be located near public facilities, schools, public transportation, etc. Researching the market can help you in finding the best areas and best properties to invest in. Remember that the hottest destinations are not always the most profitable ones. Time to Buy a Rental Property Successful real estate investors finance properties that will bring a good return on investment. But how can you ensure that your property will have such? Well, performing the analysis is one of them. Moreover, by knowing the market value of your desired investment property and not paying over that amount of money will minimize costs and increase the return on investment. Now you have more information on what is market analysis. However, Mashvisor can offer you much more information. For instance, you can learn more about the best places to invest in real estate when you want to buy a rental property. Do not waste your time and visit Mashvisor now! If you want to receive Mashvisor’s blogs on a regular basis and be in touch with the new real estate trends, sign up here. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL CMALocationMarket AnalysisReal Estate CompsReal Estate Education 0 FacebookTwitterGoogle +PinterestLinkedin Yoana Leusin Yoana is an experienced content writer with a BA in leisure studies who enjoys giving tips to beginner real estate investors. Previous Post How Do You Find The Best Multi Family Real Estate for Sale to Invest In? Next Post Airbnb Profit Calculator: The Ultimate Real Estate Investment Tool Related Posts Atlanta Real Estate Market 2018: The Trends Investors Need to Know About Buying an Investment Property: Get Ready For It to Be a Buyer’s Market Buying a Foreclosed Home at House Auctions: What Real Estate Investors Should Know What Makes for the Best State to Invest in Real Estate? Escrow Refund: What Investors Should Know Flipping Houses with No Money Can Be Done! Here’s How Having a Rental Property in These 10 Best Places to Invest in Real Estate in the US Is a Must Want to Be Rich? Start Real Estate Investing in Your Twenties Investing in Single Family Homes: Why It’s a Must How the Most Successful Real Estate Investors Attain Massive Rental Income What is a Defeasance Clause in Real Estate? Weighing Your Investment Options: Rely on Equity or Take Out a New Mortgage?