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How to do a Real Estate Market Analysis Like a Pro

How to do a Real Estate Market Analysis Like a Pro

July 24, 20239 min read

Are you looking to venture into the world of real estate investments? One of the most crucial aspects of successful real estate investment is conducting a thorough market analysis. Understanding the market dynamics and trends is essential to make informed decisions and avoid costly mistakes. In this comprehensive guide, we will walk you through the step-by-step process of performing a real estate market analysis like a pro.

Why Market Analysis Matters

Before we delve into the nitty-gritty of market analysis, let's understand why it holds such paramount importance. In a hot real estate market, where multiple buyers are vying for properties, emotions can cloud judgment. However, seasoned real estate investors know that the real money is made at the time of purchase, not during the sale.

A market analysis allows you to assess the property's potential for value appreciation, rental income, and overall profitability. Armed with this knowledge, you can identify properties that align with your investment strategy and make wise choices that lead to long-term success.

Independent Analysis vs. Relying on Real Estate Agents

While consulting a real estate agent for market analysis has its merits, conducting your independent research brings several advantages. Real estate agents may lack specialized knowledge in rental property investments or may be preoccupied with day-to-day activities, limiting their capacity to see the bigger picture that investors need.

To overcome these limitations, consider conducting your own market analysis using reliable sources and unbiased data. This empowers you to gain a deeper understanding of the market and make data-driven investment decisions.

1. Look at Historical Data First

To understand where the market is heading, start by examining its historical performance. Online resources such as Zillow and the National Association of Realtors (NAR) provide valuable insights into past sales and pricing trends. Analyzing historical data helps you identify patterns and gauge the market's overall trajectory.

2. Dig Deep into Your Target Market and Neighborhood

Once you've chosen a specific market, immerse yourself in every detail about the area. Utilize market summaries from reputable sources like Roofstock to gain comprehensive insights into:

  • Market overview

  • Population and job growth data

  • Major employers and workforce education levels

  • Local housing market activity

  • Past, current, and future rental property market trends

  • Quality of life rankings to forecast future demand for real estate

3. Use Multiple Sources to Gather Unbiased Data

To ensure unbiased analysis, gather data from diverse sources. Rely on local newspapers, community websites, social media, investment clubs, and online investment portals. This approach helps filter out inherent biases and provides a more holistic perspective of the market.

4. Understand How Market Factors Affect Investment Strategy

The success of your investment largely depends on aligning your strategy with the market's characteristics. Consider factors like:

  • Property types in high demand

  • Most active agents and investors in the area

  • Local home wholesalers

  • Percentage of renter-occupied households

  • Housing inventory stock

  • Proximity to major employers

6 Key Steps to Real Estate Market Analysis

Now that you understand the significance of market analysis let's explore the six key steps to conduct a thorough analysis:

1. Research Neighborhood Quality and Amenities

Start by researching the neighborhood's quality and amenities using county assessor websites and Google Maps' Street View. Consider factors like proximity to public transportation, shopping centers, schools, parks, and recreational amenities. An area's amenities significantly impact property value and desirability.

2. Obtain Property Value Estimates for the Area

Calculate the average sale price per square foot for recent home sales in the target area. Utilize data from local real estate agents, property management companies, online listing databases, and county assessor websites. These estimates give you a baseline for property values in the market.

3. Select Comparables for Your Real Estate Market Analysis

Choose six comparable properties: three recent sales and three currently listed properties. Ensure that the selected properties share similar characteristics, such as the number of bedrooms, square footage, lot size, and original construction date. This process provides a basis for comparison and helps determine fair market value.

4. Calculate Average Price of Comparable Listings

Create a spreadsheet with detailed information about the subject property and the six comparables. Include data like selling or listing price, square footage, number of floors, elevation, age of the house, bedrooms, bathrooms, kitchen and bathroom upgrades, and more. Calculate the average price per square foot for each property.

5. Fine-Tune Your Market Analysis with Adjustments

Account for variations in property features and amenities among comparables by making adjustments. Features like swimming pools, newer roofs, or additional rooms may affect property values differently. Recalculate the price per square foot after making adjustments to gain an accurate fair market value for your subject property.

6. Put Your Team to Work

Once you have a clear idea of the property's value, engage your real estate team to conduct an on-site evaluation. Pay attention to curb appeal, property condition, neighboring houses, and any necessary repairs or updates. Having a reliable team on the ground ensures you make well-informed investment decisions.

Common FAQs About Real Estate Market Analysis

Here are some frequently asked questions about real estate market analysis:

Can I find comparables without using the MLS?

Absolutely! You can access recent sales and active listing information from public property records, online listing platforms like Zillow, and Roofstock's marketplace.

Should I look at expired listings during market analysis?

Yes, reviewing expired and 'off-market' listings can offer insights into market pricing. Expired listings typically suggest overpriced properties relative to their actual market value.

Is a bigger house always a better value?

Not necessarily. The best properties for real estate investors are often those that align with the median range in the neighborhood. Consider the market's demand for various property sizes before making a decision.

What are the most critical factors when selecting comparable properties?

Three key factors to consider when choosing comparables are recency of sale, proximity to the subject property, and unique characteristics of each comparable.

Put Your Real Estate Market Analysis to Work

By following the steps outlined in this guide, you can conduct a real estate market analysis like a seasoned professional. Armed with data-driven insights, you'll be well-equipped to make informed investment decisions, identify profitable properties, and build a successful real estate portfolio.

Remember, leveraging online listing platforms like Roofstock can further enhance your market analysis, providing invaluable rental property returns and market value data for various locations across the United States.

So, venture into the exciting world of real estate investments with confidence, armed with your newfound market analysis expertise!

Putting together a comprehensive real estate market analysis is crucial to making smart investment decisions. By following the steps outlined in this guide and conducting independent research, you can position yourself as a savvy real estate investor who can navigate through different market conditions and seize lucrative opportunities.

Remember, continuous learning and staying up-to-date with market trends are essential in the ever-evolving real estate industry. With the right knowledge and approach, you can leave other investors behind and achieve remarkable success in the world of real estate.

Now, armed with your newfound market analysis expertise, it's time to take action and embark on your journey to real estate investment success! Whether you're looking to buy your first rental property or expand your existing portfolio, conducting a thorough market analysis will always be your secret weapon. So, seize the opportunity, explore the possibilities, and make wise investment decisions that lead to long-term prosperity.

How to do a Real Estate Market Analysis Like a Pro - How to do Research on Properties?

1. Define Your Investment Criteria

Before diving into property research, it's crucial to establish your investment criteria. Determine the type of properties you're interested in, such as single-family homes, multi-unit buildings, or commercial spaces. Set a budget range, preferred location, and desired cash flow and return on investment (ROI) targets. Having clear investment criteria will streamline your property search and narrow down the options.

2. Utilize Online Listing Platforms

Online listing platforms, such as Roofstock, Zillow, and, are valuable resources for property research. These platforms provide comprehensive property listings, including detailed information about the property's features, amenities, photos, and even virtual tours. Take advantage of advanced search filters to find properties that match your criteria precisely.

3. Conduct Comparative Market Analysis (CMA)

A Comparative Market Analysis (CMA) is a fundamental aspect of property research. It involves comparing the target property with similar recently sold properties in the area. Look for properties with comparable features like the number of bedrooms, bathrooms, square footage, and lot size. This analysis gives you an estimate of the property's fair market value and helps you negotiate the right price.

4. Evaluate Neighborhood Trends

Beyond the property itself, consider the neighborhood's trends and potential for growth. Research factors like population growth, job opportunities, school ratings, crime rates, and proximity to amenities. A thriving neighborhood with strong economic fundamentals will likely lead to increased property value and demand for rentals.

5. Review Property History and Title

Before making an offer, delve into the property's history and title. Obtain a property title report to ensure there are no liens, encumbrances, or legal issues that could pose future challenges. Additionally, review the property's ownership history, previous sales, and any significant renovations or repairs that were made.

6. Analyze Rental Market Demand

If your investment strategy involves rental properties, research the local rental market demand. Look at vacancy rates, average rental prices, and rental income potential. Understanding the rental demand in the area will help you determine the property's cash flow potential and overall profitability.

7. Seek Professional Inspections

Always enlist the services of a professional property inspector to thoroughly assess the property's condition. An inspector can identify any hidden issues or maintenance needs, ensuring you make an informed decision. Factor the inspection report into your evaluation of the property's value and potential costs.

8. Consider Long-Term Appreciation Potential

While cash flow is essential for rental properties, don't overlook the long-term appreciation potential. Research the property's historical appreciation rates and projections for the future. Investing in an area with strong appreciation potential can lead to significant wealth accumulation over time.

9. Assess Financing Options

Research different financing options and mortgage rates to understand the financial implications of the investment. Consider the down payment required, interest rates, and loan terms. A thorough understanding of financing options will help you budget effectively and maximize returns.

10. Consult Real Estate Professionals

Throughout the property research process, don't hesitate to consult with real estate professionals, such as agents, property managers, or experienced investors. Their insights and expertise can provide valuable guidance and help you make well-informed decisions.

In conclusion, mastering the art of real estate market analysis and property research is the key to achieving success in the competitive world of real estate investment. By understanding the intricacies of market dynamics and diligently researching individual properties, investors can make informed decisions that lead to long-term profitability and financial growth.

The process begins with a comprehensive real estate market analysis, where investors gain insights into market trends, demand-supply dynamics, and local economic indicators. Armed with this knowledge, they can strategically choose markets that align with their investment goals and risk appetite.

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Betty Gonzalez, the founder and CEO of Doral Homes, is a licensed Realtor® in the state of Florida and a trusted authority on real estate in the Doral, Florida area. Her passion for the communities in which she lives and works is the driving force behind her work at Doral Homes. Betty and her team are committed to providing exceptional service and expertise to their clients, utilizing their deep knowledge of the local market and industry to achieve the best possible outcomes.

Call Us! (305) 890-3233