Have you heard the term “real estate comps” before? Are you new to the real estate investing world and bedazzled by all the fancy concepts and terminology? To help you out in your journey of making money in real estate without getting unnecessarily confused, we will show you the 4 best ways of how to find real estate comps.
What Are Comps in Real Estate?
First things first. Let’s start by dissecting this real estate concept. Real estate comparables, or real estate comps for short, are properties similar to the one you are considering buying or selling located in the same area (within a radius of 3 miles) which were sold recently (no more than 3 months ago). In other words, these are properties that are comparable to the one you are analyzing. The most important factors to take into consideration include:
- Property type: single family home, multi family home, townhouse, condo, apartment, or another
- Property size in square footage
- Property age
- Date of last major maintenance work
- Number of floors
- Number of bedrooms and bathrooms
- Property features such as flooring, finishing, fireplace, heating system, cooling system, balconies, verandas, swimming pool, garden, parking places, and others
- Lot size
For your real estate comparables to be as accurate as possible, you should look for properties that are very similar to your investment property. Moreover, they should be located no more than 3 miles away, though obviously the closer, the better. Last but not least, focus on houses which were sold within the last 3 months. The real estate market is a dynamic one, and things can change drastically over the course of several months.
How to Use Real Estate Comps
Now that we’ve defined real estate comps, let’s take a look at the many different ways in which they help various real estate professionals make better decisions and conduct business. Individuals who benefit the most from having access to real estate comps include:
- Property buyers: Both homebuyers and real estate investors need to find out real estate values in the local housing market before buying a property. Knowing how much comparable homes have sold for in the past few weeks allows property buyers to judge the fair market value of the home they want to buy. For investors, buying at fair market value or below market value is key for making profitable real estate investments with high return.
- Property sellers: When you decide to sell your house, you have to list it at a price close to the current market value in order to speed up the sale without losing money from it. Thus, you need to find out property values of similar houses in the neighborhood which have been recently sold. That’s the best estimate of the value of your own property that you can get.
- Real estate agents: Realtors rely on comps to be able to find the best homes for sale for their clients and to be able to close deals efficiently. Agents need to know how much properties in their housing market are selling for in order to stay competitive.
- Home appraisers: Appraisers make money in real estate by analyzing and evaluating real estate listings. To do that accurately, they need to be aware of the predominant house values in their market for each specific property type and variation.
How to Find Real Estate Comps
If you belong to any of these categories of real estate professionals, you must be curious about the best ways to find house comps rightnow. Without further ado, here they are:
1. Conduct Comparative Market Analysis
Performing comparative market analysis, or CMA for short, is the oldest and most traditional way of finding real estate comps. The first step in the real estate market analysis is to analyze the property you want to buy or sell to identify all main features as listed above. Then you have to actively look for various resources such as the MLS (keep in mind that only agents have access to this), public property records at county offices, real estate websites, and old property listings to find recently sold properties similar to yours. Trust us, this sounds much easier than it actually is. CMA real estate analysis can take several weeks for an unskilled real estate investor or a new real estate agent.
Related: Comparative Market Analysis: A How-to Guide for Real Estate Investors
So, in simple terms, comparative market analysis is not the way to find real estate comps. It is too outdated.
2. Work with a Real Estate Agent
If you are a beginner real estate investor or a first-time homebuyer, you are probably planning to hire an agent anyway. If this is the case, you will be happy to hear that your real estate agent will be able to help you with how to find real estate comps too. First of all, agents have access to the MLS, where you can find all recently sold properties in any neighborhood in any US housing market. Moreover, agents are familiar with the real estate values in their market as they were engaged in the actual recent real estate sales. Hiring an agent comes with the additional advantage that he/she will negotiate the best possible price for you and close the deal quickly.
However, working with an agent is not always ideal, especially if you have some experience in real estate investing. To say the least, you will have to pay significant fees, particularly if you are the property seller.
3. Hire a Home Appraiser
Getting a formal home appraisal is yet another way to obtain the real estate value of your property for sale or the investment property you’d like to buy. In addition, hiring an appraiser is much cheaper than working with an agent as it costs only a few hundred dollars per house.
However, this method of finding real estate comps also features one main drawback. If you’d like to analyze several different properties for sale to get their house price estimate, you will need to pay multiple times. In the end, hiring a home appraiser might cost you almost as much as working with an agent.
4. Use Real Estate Investment Tools
We’ve purposely left the best way of how to find real estate comps until the end. The real estate industry has always been competitive, but this trend has intensified immensely since the recent emergence of big data, predictive analytics, and machine-learning algorithms, driven by AI. Real estate investors and agents can no longer stay competitive in the 21st century by using 20th century methods, including in the search for real estate comparables.
Presently, you can forget about conducting investment property analysis and performing real estate CMA. All you need to do is to sign up for Mashvisor to get access to real estate comps in any US housing market.
Related: What Is Mashvisor? What Can It Do for Real Estate Investors?
Our investment property calculator uses big data to find houses similar to the rental property in which you are interested that are located in the same real estate market and were recently sold. In the image below, you can see the rental comps for an investment property for sale in the Chicago real estate market.
Mashvisor’s Investment Property Calculator: Real Estate Comps for Chicago Rental Property
What’s the biggest advantage of using Mashvisor’s rental property calculator? That you will save lots and lots of time in searching for comparables, and we all know that time equals money in real estate investment.
Another important benefit is that this investment property tool will not only show you the current market value of your property but will also conduct comprehensive investment property analysis including accurate estimates of the expected rental income, startup costs, recurring expenses, cash flow, cap rate, and cash on cash return for any traditional and Airbnb rental property in the US. All in all, 3 months of research will be turned into 15 minutes.
Related: 5 Best Real Estate Investment Tools for 2020
You can use any of these 4 methods for how to find real estate comps in 2020. However, if you want to stay up-to-date and get ahead of the competition, you need to get access to the best real estate investment tools, including the Mashvisor real estate calculator. In this way, you will never again need to conduct real estate analysis manually. Instead, you can focus on growing your real estate investment portfolio.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today and enjoy 15% off for life.