If someone would ask you the worth of your house, what would you answer? Typically we hear, “Someone down the street sold his house for Rs. X and my house is much nicer so I guess it is worth much more than that.” Sound about right?
Definitely, the valuation of properties doesn’t work like that. Things that make your home special and unique to you, not necessarily the buyers will find valuable. That is why it is great to get a third party’s opinion. The value of having a good Comparative Market Analysis (CMA) is the data and the interpretation of that data as it relates to your specific market and property.
What is Real Estate Analysis?
Real Estate Analysis or Comparative Market Analysis study investment properties in a housing market to determine its current value. It must be sounding very similar to real estate appraisal. While they may sound similar, there are some differences. The analysis is usually conducted for free and is performed by a broker but an appraisal by an appraiser. Appraisals are typically done when the financing of the property is in question however, CMA deals with something else.
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What is the importance of Real Estate Analysis?
Following are three major reasons Comparative Market Analysis of a property is important:
- Determining the value of an income property – Be it putting your property on rent or selling to make a profit or buying a new one to buy or any other transaction in real estate industry, it is not possible to do anything without knowing the value of the property.
- Determining the rent to be charged – When you purchase a property your primary goal is to get returns on your investment and in real estate, to get returns faster you need to put the property on rent. The home’s rental income is dependent upon the property’s current value. Depending on its value, you can set the rent ranging from 0.8% to 1.1% of the value.
- Setting a listing price of the property – Not every property purchased for putting on rent. Many investors prefer making a profit by buying and selling. Real Estate Analysis is very important for such investors. By finding the value of the property they are able to set the listing price for the property.
What should an integrated real estate market research report have?
- A growth analysis in the area in which the prospective investment is being contemplated.
- An analysis of the excess demand for the asset class or classes favoured by the type of growth in the metro within a defined market area.
- An analysis of the site and the neighborhood of the specific project.
Market research in the property market is very important and its relevancy is becoming more apparent in today’s market with every passing day and it will only change in the coming years as the market evolves. Apart from the importance mentioned above, CMA helps you to get familiar with the latest trends in the industry, where you should invest, what is the current pricing, how you should buy or sell a property and eventually helps you in your investment so you come out as a winner.
In short, Real Estate Analysis helps you minimize the risk involved in the industry. Many investors believe in that having a diversified portfolio is very important when attempting to maximize the potential profit and minimize potential losses. CMA reports lets you understand the real estate market and tells you the best time to purchase and to sell a property.
