There is so much to look into when investing in a property. An appraiser or a real estate agent will typically look at comparable sales, better known as “comps.” They typically research the value of properties that are currently on the market and others that have sold in the past in order to come up with an appropriate value for your investment property. This article will give you the tools and instructions you need to find the real estate comps on your own.
Previously sold properties are the key to determining market value. Find homes that are similar in size, condition, and location. The theory behind market value is that your investment property is determined by whatever others would be willing to pay or have already paid for similar homes. Real estate comps are regarded as one of the best tools for determining the worth of your investment. First off, look to decide if the area is ideal for an Airbnb investment. Preferably, the real estate comps would have sold within the past 3 months and be within 1 mile of your investment property, not crossing any major roads, highways, railways, etc. Real estate comps must be in the same neighborhood unless there is a market shortage in sales. If needed, you can extend the time frame of your real estate comp research to 6 months and the location radius to 3 miles. For an accurate market analysis, try to find at least 3 real estate comps.
Related: How to Perform a Real Estate Market Analysis
It is also possible to use active property listings as real estate comps. Keep in mind that when using this method, an active listing price on a property does not guarantee that it will sell at that amount. However, active real estate comps do give you an idea of what the neighborhood market is currently like. Keep track of current neighborhood real estate market trends and use this information as a supplement to other recently sold comps.
Obviously, there is more to an investment property than a neighborhood, age of the home, and square footage. Every single home is different, with features that make it more or less desirable. For example, evident factors that would influence a property’s value can include bedrooms, bathrooms, and garages. It is very challenging to compare a three-bedroom home to a two-bedroom home. Still, look for hidden features that can further influence an investment property’s value. For instance, a pool can significantly affect the cost of a property and even determine your rentability on Airbnb if the property is being used as a vacation home.
Find out the potential Airbnb income of a specific property in the US using our Airbnb calculator.
Knowledge of the neighborhood and the school district are also critical for determining comps. Assess other factors that might affect listing price, such as landscaping, noise, and proximity to public transportation and local businesses. Upgrades also add value to a property. Keep in mind that if you are fixing up an investment property for the sole purpose of renting it (whether traditionally or on Airbnb), find comps that have an ARV (after repaired value) because you will want to know what the market value is after the home was fixed up. In addition, different regions of the country put more value in certain home amenities than other parts of the country; therefore look closely for these hidden factors in nearby real estate comps.
Related: Investment Property Calculator for Analyzing Real Estate Investment
Real estate comps used to be difficult to come by if you were not a realtor or appraiser. Now, with real estate investment tools like Mashvisor, the information is at your fingertips. You can easily find and analyze neighborhoods and properties using real estate comps.
Start by searching the city you wish to invest in. From here, you can get a snapshot of projected cash on cash return and cap rate by hovering over the multiple neighborhoods in that city or each individual property pin. The bottom of the map will provide an overview of the neighborhood such as medium home price, traditional and Airbnb cash return, and rental income. This gives you a snapshot of neighborhood data to guide your investment property search.
There is an Airbnb tab which includes the current Airbnb listings in each neighborhood. By filtering the number of bedrooms, bathrooms, and/or budget, it gives you an understanding of neighborhood comps. Use these listings to understand how properties are actually performing in your preferred investment neighborhood. This allows you to see what your potential return on investment is. The traditional tab will give you a listing of existing rental listings in the neighborhood, also allowing you to compare real estate comps on potential investments and seeing what is on the market.
The investment tab is a listing of all potential purchases. The purchase analysis will calculate all numbers for that property, saving you time on research. This includes rental income, monthly expenses, cash flow, cash on cash return, and cap rate. Mashvisor does all the data analysis for you and gives you months of research in just minutes!
Related: How to Do Investment Property Analysis
Real estate comps are a critical part of assessing the current market value of a property. Knowing your nearby comps allows you to better invest your money. If you already know which city and neighborhood you plan to invest in, use the Mashvisor tool to determine real estate comps. If unsure on where to invest, let the real estate market analysis tool gather the data for you. Just remember, by doing your research on real estate comps and purchasing properties at or below market value, you are guaranteed to make a return on your investment!