Are you looking to sell your property or buy a new? If so, you need to know how to read a real estate market analysis. Knowing the ins-and-outs of this analysis is key to turning a profit on your property.
Don’t know what a real estate market analysis is or why it matters? In this article, we’re covering everything you need to know about this analysis, including how to perform one.
What is a Real Estate Market Analysis?
Real estate market analysis, also known as comparative market analysis, is when you compare your property’s market value to places that have been recently sold or listed for sale. During one, you compare your property to places within 1-3 miles of your place.
A comparison analysis includes at least three similar properties. For an analysis, it’s also great to learn more about the real estate markets of similar cities as these serve as a frame of reference.
Real estate market analyses are often confused with house appraisals. They’re very different. A real estate market analysis is performed by a broker or an investor, and has no financial value.
A house appraisal must be conducted by a certified property appraiser and is required for things like a property sale or legal settlement.
A market analysis is also usually performed free of charge whereas a property appraisal costs upwards of $300.
How to Perform a Real Estate Market Analysis
Now that you know what this kind of analysis is, you’re probably wondering how to actually conduct one. Here are the basic steps to follow:
Analyze the Major Characteristics of Your Property
Pay attention to all the major features of your property like square footage, numbers of bedrooms, and bathrooms. Catalog any extra amenities like a pool, fireplace, or if the property has a yard. Also write down when any recent home improvements were done, when the property was built, and how it’s similar or different from the properties you’re comparing it to.
Compare the Right Property Data
If you’re going to rent a property, you need to know how well similar properties are renting.
That’s why you should look at the vacancy rates of similar properties. This will help you determine how you can actually make in rental income. You should also look at the price per square foot, and the price the property was sold at, as this will help you determine its estimated value.
Keep track of all the differences between your property and the ones you’re comparing it with.
What’s better and what’s worse? How do the similarities and differences between properties impact your property’s overall value?
Final Thoughts on Real Estate Market Analysis
A real estate market analysis is essential for understanding what your rental property’s worth and how much you charge in rent. By conducting a thorough analysis, you can make an informed buying decision, and maximize your real estate investment!
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