Market research is the first step that any investor must take before entering the market. A real estate market analysis is a tool that assists us in gathering information to determine whether we should invest in a property or not.
A real estate agent is not always required to understand the market.
While hiring an agent to conduct a market analysis has some advantages, it also has some significant disadvantages.
For example, the agent may lack the extensive experience and specialized training to work with landlords. Alternatively, the real estate agent may be so preoccupied with day-to-day market activities that they cannot see the big picture that real estate investors rely on for success.
What is a Market Analysis?
A real estate market analysis, also known as comparative market analysis (CMA), is an examination of current trends and values for properties similar to the one you want to buy or sell.
A market analysis should always be performed, whether buying or selling a property, as it will assist in understanding the current market, how much comparable properties are worth if it is an investment property, how much you can charge for rent, and so on.
How to do Real Estate Market Analysis?
It is essentially an analysis of current market values of properties comparable to the one you want to buy or sell. A CMA is a useful tool for determining the market value of your property, particularly if you are attempting to determine an accurate selling price before listing.
Steps to do Market Analysis
Step 1 – Property Analysis
The first real estate market analysis step is to analyze the property. The following characteristics must be assessed:
- Area and Neighborhood
- Size or square footage
- Lot size
- Number of bedrooms and bathrooms
- Other rooms
- Number of floors
- Construction age
- Amenities and features
- Proximity to local amenities
- Recent or notable improvements
Step 2: Determine the Original Listing Price
After you’ve completed the property analysis, look for the original listing online, if possible. This will give you a good idea of the home’s overall condition.
Step 3 – Examine Property Estimates
Use online resources such as Zillow Zestimates to determine the home’s estimated market value. Because these are market value estimates may not be completely accurate, especially if the home has been modified.
Step 4 – Look for Comparable Properties
The next step is to look for comparable properties to yours. Comparable properties should have the same number of bedrooms and bathrooms, be within 300 square feet in size, be in the same neighborhood, have a comparable lot size, the age of the home, and have comparable features.
Step 5: Determine the Market Value
If possible, there is no better way to accurately price a home than to inspect it in person. Take note of the following factors when walking through the property: overall condition, any additions or upgrades, amenities, features, necessary upgrades or repairs, and the exterior and landscaping.
Based on your research, you should know how much your property is worth.
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