Comparative market analysis, or real estate market analysis, is one of the most important components of understanding the real estate market and being a knowledgeable and successful real estate investor. Comparative market analysis is a process in which the value of your real estate property is determined by comparing it to other similar properties that were recently sold nearby or in the same location. Keep in mind that comparative market analysis is different from the appraised value that can only be conducted by a licensed appraiser. Conducting a comparative market analysis is not as hard as you imagine and it is totally doable and manageable if you understand the real estate market and how to professionally evaluate real estate properties.

Comparative market analysis is not merely intended to only evaluate the value of real estate properties. It is actually a great way for real estate investors to understand the relationship between the real estate market and the fluctuation of real estate property prices. It gives you insight into the processes of purchasing and selling properties which makes you a better and more knowledgeable decision-maker in this regard. You can always use real estate agents to perform comparative market analysis for you; however, it is actually important for you as a real estate investor to be able to conduct it by yourself.

Advertisement

Do you want to know how to conduct comparative market analysis without the use of a real estate agent? Make sure to check How to Conduct Real Estate Market Analysis Without a Real Estate Agent.  

How to Perform a Comparative Market Analysis

1- Analyze Your Property

The very first step you need to do in order to conduct a comparative market analysis is analyzing your own property or the property whose value you wish to discover. In order to do that, you need to analyze and check the size of square footage of the property, the number of rooms it has, number of floors, construction age, any available amenities, its location and any recent improvements on the property. The value of the property will increase if it has a swimming pool, for example.

2- Choose a Few Real Estate Comparables  

There are two conditions for the comparables you need to identify: they have to be within a radius of 1-4 miles from your investment property and they should have been sold within the past 3 to 5 months. It is recommended to find 3 to 5 comparables also known as comps (properties that are similar to yours in terms of construction, age, size,etc.). Also, try to look for current listings of comparables and check their prices and values; however, keep in mind that the listings’ prices are subjective as many real estate investors or those who want to sell their properties tend to put high expectations on the value of their properties.

Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!

3- Pick Two Comparables

Once you have found 3 to 5 comps and gathered all the information you need about them, choose one property that values more than yours due to its amenities, location or size, etc. and also choose another one that values less than your property for whatever reason.

Are you still wondering how to find real estate comps easily? Make sure to check out How to Easily Find Real Estate Comps.  

4- Compare the Properties

At this point, you must have a price range between the two properties you chose as real estate comps and your property’s price or value should be located somewhere in the price range. This is where you start the comparison process between the three properties in terms of size, location, construction age, amenities, etc. in order to better determine the price of your property within your real estate market. Finally, the price you determined for your property is its actual value within the real estate market and that is the market value of your property.

Do you want to become an expert on comparative market analysis? Make sure to read Become an Expert on Comparative Market Analysis with Our Guide.      

Comparative Market Analysis: Using Mashvisor

Getting to know and understand comparative market analysis and how to conduct it is important for you as a real estate investor; however, you have to work smarter not harder to succeed in today’s fast-moving world. Instead of spending time and efforts on finding real estate comps, collecting data and so on and so forth or spending money on real estate agents to perform comparative market analysis for you, you have the chance to use Mashvisor. Mashvisor can actually find and analyze properties on both neighborhood and property levels in the neighborhood or city of your choice. It does so by analyzing properties’ data such as cash on cash (CoC) return, capitalization (cap) rate, occupancy rate, costs, rental income and real estate comps in the neighborhood you want. You can be as specific as you want in regard to the type of properties you are looking for through using the available filters.

It is worth mentioning that Mashvisor’s figures and numbers are totally reliable because they are all based on actual data from properties and comparative analysis. On top of that, Mashvisor will give you the data you need for traditional and Airbnb real estate comps in order to decide which strategy suits you best in case you are interested in investing in rental properties.

Bottom Line

The housing market is always changing and so is the value of real estate properties; thus, knowing how to conduct comparative market analysis is important for selling, purchasing and investing in real estate properties. While performing comparative market analysis, make sure to never overprice or price your property for less than what it deserves. Try to value your investment property in a way that corresponds with the real estate market at the time of conducting the comparative market analysis. Taking the above-mentioned points into consideration will make it easy for you to study the market and evaluate your property accordingly.

Use Mashvisor to quickly analyze real estate markets nationwide.

Start Your Investment Property Search!