Finding real estate comparables (real estate comps) is a crucial part of investing in properties. Sellers and buyers cannot
succeed in the real estate business without using comparables. If you are wondering what real estate comps are and where to find them, this guide is designed for you.
Related: Everything to Know About Real Estate Comps and How to Find Them
So, what are comps in real estate?
A real estate comp is a property that is comparable or similar to the one you are thinking of buying or selling. These are some of factors to take into consideration when looking at comparables:
- Kind of property (single family home, townhouse, condo, apartment, multifamily home, etc.)
- Major features (balconies, verandas, swimming pool, garden, fireplace, etc.)
- Square footage or size
- Year of construction
- Condition
- Number of floors
- Number of bedrooms and bathrooms
- Land area
- Amenities (cooling system, heating system, etc.)
- Date of last major renovation or maintenance work
To qualify as a real estate comp, a home should have been sold within the last 3 months. In addition, it should be located within a radius of 1 to 3 miles from your property of interest.
Why is it important to use real estate comparables?
Real estate investors can use comps to:
- Decide how much to offer on a home – As a buyer, real estate comparables will give you an idea of what a potential investment property is worth. In this way, you can be sure you are not overpaying for a home, which in turn enhances your chances of making a good return on investment, whether you are looking at cash on cash return or cap rate.
- Estimate a listing price for your home – If you are a property owner, you can use real estate comps to determine what the fair market value of your home is, if you were to sell. You can also use rental comps to determine how much to charge for rent for your income property, whether listed on Airbnb or as a traditional rental.
- Analyze the performance of a neighborhood – Before purchasing an income property, real estate investors need to conduct a real estate market analysis to check the general performance of the neighborhood they are interested in. Part of this analysis involves gathering data about the market such as real estate appreciation, property prices, occupancy rates, and rental rates. To find such data, investors should look at real estate comparables in the neighborhood. Seeing how similar rental properties are performing will show whether buying property in that area to rent out is worthwhile or not
How to find real estate comps
Now you know what a comparable is and why it is important in real estate. The big question that remains is: ‘How do you get real estate comps for your neighborhood?’ Here are some of the strategies you can use to find real estate comps in your area:
Work with a real estate agent
Hiring an agent is a common method used to research real estate comps. Licensed agents have access to the multiple listing service (MLS), a database containing thousands of recently sold homes in any area of the US housing market. They can easily pull real estate comparables from the database and offer you an accurate estimate of your property value. Besides helping you find comparables, a real estate agent will also come in handy during the negotiation and closing process. However, the main disadvantage of this method is that you will have to pay a high amount of fees, especially if you are the home seller.
Hire a home appraiser
Another way of estimating the value of an investment property is by getting a formal home appraisal. Since a home appraiser specializes in valuating properties, he/she can tell you the exact value of a home at the market. Appraisers usually charge only a few hundred dollars per home which makes it cheaper than working with a real estate agent if you are the property seller.
Conduct a comparative market analysis (CMA)
Comparative market analysis is another traditional strategy for finding real estate comps. CMA helps you evaluate the value of a property based on recently sold listings, pending listings, currently running listings, and expired listings. To find recently sold homes or currently listed homes similar to yours, you can look at real estate listings online, public records from your county, and old property listings. The problem with comparative market analysis is that it can take weeks for a beginner real estate investor. In this technologically advanced age, this method is too outdated.
Related: Comparative Market Analysis: A How-To Guide for Real Estate Investors
Use real estate comps software
In recent years, the real estate industry has seen the emergence of machine-learning algorithms, predictive analytics, and big data. To stay ahead of the competition, investors need to use modern methods to look for real estate comps.
The best way of finding real estate comps is by using Mashvisor’s real estate investment software. Our platform will help you find properties similar to the home in which you are interested, which were recently sold and are located in the same market. You will find rental comps at two levels: the property level and the neighborhood level.
The property level
After selecting a target neighborhood, you will see all the income properties that are listed for sale. Clicking on a specific property will reveal the estimated rental income, expenses, occupancy rate, and cash on cash return associated with that home. In addition, you will see a listing of recently sold properties in the same neighborhood with details such as:
- Days on market
- Sale date
- Property square footage
- Price per square foot
- Sale price
With Mashvisor, you also get access to rental comps.
Mashvisor: Real Estate and Rental Comps at the Property Level
The neighborhood level
Location is one of the most important considerations when investing in real estate. Choosing a great city to invest in is not enough. You need to find the best neighborhood in that city. When you type in the name of any US city on Mashvisor’s investment property calculator, you will see all the major neighborhoods. The tool will display important metrics such as cash on cash return, cap rate, rental income, and median property price. Checking the real estate comps in a city will help you decide which neighborhood would be best for investing.
Mashvisor: Real Estate and Rental Comps at the Neighborhood Level
Conclusion
Finding comparable home sales doesn’t have to be time-consuming or costly. With the right real estate investment tools, you can find what you are looking for fast and at a low price. Sign up for Mashvisor now and get 15% off to access real estate comps quickly and effortlessly.
Related: How to Find Real Estate Comps in 2021