How to Do a Professional Real Estate Market Study
Market studies are often a necessary step in the process of buying or selling a home. It can give you valuable insight into the overall health of a real estate market, which can help you make an educated decision about whether it’s worth investing your time and money!
Do you want to be able to do a professional market study but don’t know where to start?Luckily, you are in Real Estate Heaven. In this blog, you will learn how to do an effective real estate market study that you can use for your blog or website. Continue watching and don’t forget to give this blog a big thumbs up.
How to do a real estate market analysis like a pro?
Avoiding being emotionally attached while purchasing a rental property investment is one of the hardest things to do. When other house buyers are lined up and prepared to make an offer, it’s simple to make the wrong choice in a hot real estate market.
The maxim of profitable real estate investors is that profit is made at the time of acquisition, not at the time of sale. This is so because improving a rental property is considerably simpler than trying to sell an overvalued home.
We’ll go into great length in this post on how to conduct a real estate market study to find a property that makes sound financial sense to purchase.
You don’t always need a real estate agent to understand the market
While there are certain benefits to having a real estate agent conduct a market analysis for you, there are also some significant disadvantages.
For instance, the agent can lack the extensive knowledge and specific training required to engage with investors in rental property. Or, the real estate agent can be too preoccupied with the day-to-day business of the market to be able to comprehend the big picture that real estate investors need to succeed.
Fortunately, there are a number of excellent ways to gather the data required to conduct an independent real estate analysis.
Analyze previous data first
It’s critical to comprehend where the market has been in order to predict where it will go. It’s simple to find out what’s been selling and for how much by looking at online real estate market performance data from Zillow or the National Association of Realtors (NAR).
Look closely at your community and target market
Investors should become completely immersed in the subject once a specific approach has been decided upon for each market.
The Roofstock market summary is an excellent source for comprehensive real estate market data. Everything you need to know is presented in an understandable style and includes:
- review of the market
- population and employment statistics
- major employers and educational levels of the workforce
- Activity on the local housing market for the city and metro area
- Market trends for rental property in the past, present, and future
- Rankings of quality of life can be used to forecast future real estate demand.
Use a variety of sources to find accurate information
You can eliminate the inherent prejudice some people in that market may have by using the internet to get transparent data from various sources.
Rental property investors can learn about the local real estate market by using the following resources:
- Local newspapers
- Community websites
- Social media
- Investment clubs
- Online investment portals
Recognize how market variables impact investing strategy.
Investors in rental properties that are most successful pick markets that complement their investment philosophy.
For those investors who are only interested in cash-flowing rental properties, Birmingham or Pittsburgh may be a perfect fit for a long-term buy-and-hold strategy. On the other side, investors in real estate who are seeking markets with quickly increasing property prices are choosing to place their money in places like Atlanta and practically every Florida city.
A real estate market analysis should take into account a number of important aspects, such as:
- Property types with the greatest demand
- Most active agents and investors
- Who the local home wholesalers are
- Percentage of renter-occupied households
- Housing inventory stock
- Where the biggest employers are located
We will give you 6 Key Steps to Real Estate Market Analysis
Instead of using the asking prices for properties that are currently on the market, recent sales prices should be used when conducting a real estate market study. This is because the listed price represents the seller’s expectation while the final sales price reflects the actual amount they were paid.
When conducting market research, real estate investors take comparable processes as an appraiser would. When done correctly, the discrepancy between what you estimate a property is worth and the appraisal’s final price shouldn’t be that large.
- Investigate the amenities and quality of the community
Without ever leaving your workplace, you can investigate and narrow down potential real estate acquisitions using county assessor websites and Google Maps’ Street View. Simply cross off the property from your list and move on to the next one if the home backs up to a landfill or busy road.
Other neighborhood characteristics and features that influence property value include accessibility to shops, schools, and public transportation, as well as local recreational features like parks and beaches.
You can also enter the address of a specific single-family home into Roofstock’s Cloudhouse tool if you have your eye on it. You’ll receive a thorough and fully customisable underwriting estimate in addition to a Neighborhood Rating powered by Roofstock that rates the neighborhood from 1 to 5 stars.
- Find out what the local properties are worth
For a “ballpark” property value assessment, figuring out the average sale price per square foot for homes sold in the neighborhood you’re considering is a reasonable method. The websites of the county assessor, local real estate agents, property management firms, internet listing databases, and other sources are all useful.
Remember that these average calculations are just that: averages. They disregard special features of the house or the community that could raise or lower the value of the subject property.
- For your real estate market analysis, choose comparables
Picking six comparable homes will serve as the basis for your initial real estate market analysis. Choose three properties in the neighborhood that were recently sold, followed by three properties that are currently for sale.
Look for the following when choosing comparables for your subject property:
- Houses with the same amount of bathrooms and bedrooms.
- Homes with square footage between 10% and 20% of your intended buy.
- A home with a similar-sized and-shaped land.
- Choose residences that have the same elevation (often referred to as an architectural design), number of stories, and year of construction.
- Houses with comparable features, like a free-standing garage, a patio deck or outdoor pool, and picturesque vistas.
- Pick residences that are nearby and, ideally, on the same block.
- Choose homes in the same school district (because a low-quality school can have a significant negative impact on value).
- Determine the average listing price for similar products
After gathering this data, you should make a spreadsheet for each of the seven properties, including the one you’re considering purchasing, the three recent sales, and the three houses that are now for sale.
Each house’s address should be listed in the first column. Next, make separate columns for each of the following features and amenities:
- Price of sale or asking price
- Square footage
- Amount of floors
- The home’s age
- Kitchen renovations
- Bathroom improvements
- Recreational space or extra rooms
- Sunroom or patio that is enclosed
- Condition of the furnace and water heater
- Age and central air conditioning
- Roof materials, age, and condition
- Parking in a garage, carport, or on the street
- Watering hole
Calculate the average cost per square foot for each of the seven homes after you’ve completed your spreadsheet.
- Adjust your comparable to fine-tune your market analysis
There’s a chance that not every home on your list of comparable has the exact same features and facilities because every piece of real estate is different.
You must modify your comparable to ensure that you are comparing like with like. An adjustment is something that changes the value of the subject property in some way.
You can utilize the spreadsheet format to see a trend in how the unique characteristics and extras of each home influence the sales or listing price as well as the price per square foot.
For instance, the price per square foot could be higher since swimming pools and more recent roofs might add value. Homes with only two bedrooms will be worth less than homes with three bedrooms, and a home with an ancient roof or an antiquated heating and cooling system will be worth less than one with more recent upgrades.
Recalculate the price per square foot once you’ve completed making changes to your comparables. This will offer you a precise notion of the subject property’s fair market worth.
- Employ your crew
Your final step is to start the process and put your local market real estate professionals to work now that you have a fair notion of how much the house is worth.
Request a visit from the property’s manager or local real estate agent. Check out Roofstock’s partner network if you’re still assembling your team.
Your on-the-ground crew should pay special attention to the property’s overall condition, the need for any urgent repairs or updates, the landscaping, adjacent homes, and curb appeal. Investors from other states can also use Google Maps or nearby businesses that offer services for aerial drone video and photography.
Additionally, do a comparison between the facts from your market research and the specific characteristics and amenities of the target home as well as the details from your property inspection report. On listings and even county assessor websites, mistakes can and do happen.
A real estate market study frequently asked questions
Is it possible to locate comparables without using MLS?
Without a doubt. Public property records on the website of the county assessor, Zillow, and Roofstock’s marketplace of active listings are additional sources for locating information about recent sales and active listings.
When conducting a real estate market study, should I take a look at expired listings?
To determine the price the market will accept, many real estate investors look over expired listings and “off market” listings. Homes that are removed from the market without being purchased are typically overpriced in comparison to their actual market value.
Is a bigger house necessarily a better investment?
The homes that match the neighborhood’s median range are typically the best ones for real estate investors. Smaller homes may be challenging to rent, while larger properties may yield lower income per square foot than the market average, for instance, if the majority of the homes in a region have three bedrooms.
What elements should you take into account when choosing comparable properties?
The most important things to take into account when selecting the best comparables are the date of the most recent sale, the location of the home in relation to the subject property, and the particular qualities of each comparable.
Use the results of your real estate market analysis
You may determine where you are in the real estate market cycle and whether it is preferable to buy, sell, or hold real estate by performing a thorough real estate market study.
When buying real estate, investors conduct a market study to find properties that will be profitable and best suit their investment philosophy. To identify the optimal sales price and marketing plan, sellers do a real estate market analysis.
In actuality, there is profit to be had in any real estate market. Investors use internet listing services like Roofstock to research market prices and prospective rental property returns for properties around the United States.
Buyer’s and seller’s marketplaces are created by supply and demand
Even though there may be numerous properties in a community, typically only a few are up for sale at any given time. Which side of the market is more favorable to buyers or sellers depends on the supply of properties for sale compared to the demand to purchase them.
It’s a terrific time to be a buyer when there are numerous homes for sale but few buyers interested in them. It is a buyer’s market at the moment.
In contrast, when there are few homes for sale but many interested parties, it is an excellent moment to be a seller. It is a seller’s market at the moment.
When you purchase in a buyer’s market, you are quite powerful. You might be able to negotiate a cheaper price and a closing date that suits you. The seller may cover a portion of your closing expenses or postpone closing until you have sold your present residence.
In a seller’s market, purchasing can be challenging. Multiple offers could be made to the seller. A bidding war may increase the price of a home if it is very sought-after. Even if the seller’s terms are costly or onerous for you, you might have to accept them.
In a seller’s market, you have a lot of negotiating leverage. Several bids for more than your asking price may come in. Often, you can dictate the parameters that you want. Your house might not need to be fixed up to sell.
Selling might be difficult in a buyer’s market. You might not get the price you want or the price your neighbor paid for a house just like yours a few months ago. To sell your house, you might need to perform a lot of repairs and renovations.
For information on the housing market, see the National Association of Realtors (NAR), a trade group for real estate agents. In significant metropolitan areas, the association keeps track of the number of closed and pending sales of existing residences. The association’s economists regularly include useful insights into the supply and demand dynamics affecting the nation’s housing markets in their monthly publications of data and studies.
Numerous local Realtor groups and multiple listing services (MLS) also release statistics and analysis on the neighborhood housing market that can aid in your understanding of market dynamics.
A real estate market study can seem like a difficult chore to learn how to accomplish on your own. However, according to our detailed instructions, you will be able to estimate a home’s price accurately for any real estate venture.
If you’re a seller, do real estate market research to make sure you’re not overcharging for your house. Listings that are overpriced eventually expire and lose their freshness. You’re likely to lose more money as time goes on if your house is on the market. A home that is overpriced will, on the other hand, lose out on prospective revenue. For the most precise market estimate for your home, make use of free web tools.
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