Many investors have failed to understand that market analysis is the key determinant factor in deciding the success and failure of any real estate investment they make. Whether they lack the knowledge and expertise or are unable to comprehend the benefits associated with it, market analysis is an underrated concept in real estate investment. However, it is that valuable asset that forms the base for every calculation and conclusion that follows. That is to say, comprehensive researching and understanding of market analysis are paramount for evaluating a property. When real estate investors are looking for making an investment, then this analysis comes in handy.
As the market is flooding with real-estate properties with each passing day, this analysis enables them to decide the best investment property for them. Therefore, this article aims to help real estate investors understand the term and the different steps that they need to make while conducting a real estate market analysis.
What Does the Term ‘Real Estate Market Analysis’ Signify?
A comparative real estate market analysis is pertinent for any successful real estate investment. Because it allows real estate investors to make the right decisions on the basis of factual and historical data. This data will ultimately allow them to gain the highest yields. Not only this, since the real estate market is booming, the market analysis also helps them decide the best property to invest in. Because not all the properties in the real estate market will be equally optimized for investing. Therefore, whether you are a property finder in UAE or anywhere in the world, conducting a market analysis will help you determine the most favorable options for making an investment. Meanwhile, it will help you to avoid making investments on a purchase that does not meet your expectations or criteria.
How to Do A Real Estate Market Analysis?
A comparative real estate market analysis might appeal to be a very time consuming and daunting task. And for any beginner investors, it becomes very difficult to obtain the data needed for doing this analysis and the steps required for analyzing the market in which they are interested to make an investment. Therefore, below are the steps that beginners and experienced alike should do while conducting real estate analysis.
1- Selecting A Location
The first step for conducting a real estate market analysis is the selection of an area of interest. Although many real estate investors want to make an investment in their local area, it might not always prove to be a sane choice. Everyone knows that it is the location that is the real game-changer. So, before deciding, they need to research different markets and the available options. Therefore, look for that buyer’s market that has a good performance and a potential for appreciation.
2- Choosing the Best Property Type for Real Estate Investing
After determining the market to invest in, real estate investors need to select the best property types for their investment. This is dependent on two things: your personal choice and the best property type in that market. There are some properties that give remarkable outcomes in certain areas while a considerable decline in the others. So, make sure to do a market analysis before you make any decision. The results of this examination will profoundly affect the other steps of the real estate market analysis.
3- Searching Reliable Data Source
The next step here is to find a reliable data resource. Investors can easily find abundant data online related to the properties available for sale or the ones that have been sold. The important data that investors need to collect should include the following:
- Property characteristics (such as number of rooms, age, size, number of floors, amenities, facilities)
- Walk-score
- Property status (sold, pending, for sale)
- Property prices/sale prices
- Recent improvements
4- Categorizing A Number of Similar Properties in the Market
After collecting the data, it is time to analyze a number of properties that are similar to the investment property type that the investors have decided on in the second step. These are called real estate comps. While doing a comparison, they should select 3-5 properties for sale as well as the properties that have been recently sold. Another thing is that, the investment properties that are chosen should be similar in terms of their size, age, type and number of rooms.
5- Comparing Investment Properties
The next step is to make a comparison in different investment properties. Since the real estate investors choose the potential properties for their investment, they need to compare properties with regards to their prices. Determine which factors are responsible for affecting the prices of the properties. Do this step twice: once for the properties that are being compared and other for the properties that have been sold recently.
6- Identify the Best Investment Property
This is the final step in the real estate market analysis. Investors should consider all the data and visit the properties. Examine any other feature that might affect the price of the property in the future. Also, they need to analyze whether the property is in good condition or it requires renovation. Because then, they will have to add the price needed for revamping too. In addition, visiting the property will help them to make a thorough investigation and a prudent decision.
All in all, conducting a real estate analysis is not an easy task. However, as investors conduct more real estate market analysis, they will start to get the hang of it. They will be able to better identify the features and aspects of each investment property that make it stand out and increase its potential as a real estate investment.
