The Art of Comping Real Estate Properties
Master the art of comping real estate properties by determining if the valuation of the property is accurate before you buy. Whether you are selecting a property to sell, or appraising the property to keep, it is crucial that the valuation of the property remains front and center. With keeping this in mind, investors not only make a profit, but more importantly create generational wealth.
So, what do you need to look for before purchasing your next property? Well, here’s a quick and easy guide that allows you to become an expert at comping real estate properties.
It really is as easy as 1, 2, 3!
First, don’t trust the sources that are selling you the property!
Whether it is a relator or wholesaler, their main goal is to make money off the sale. In almost all cases, they are wanting to sell a property for as much as possible just to make a larger profit. Don’t dive into a purchase without doing the research yourself, checking the valuation, and most importantly comparing apples to apples.
Second, put yourself in the buyer’s position!
It is easy to get wrapped up in the numbers and forget to look at properties from the buyer’s point of view. Take a step back, and look at the neighborhood. Do neighborhoods in the area have the same amenities? What about the square footage of the home? How is it comparable to other properties on the market? Finally, is the property in need of a lot of work? These are just a few questions you need to ask yourself to determine if your comps match the valuation of the property.
Third, find a few good properties per year!
Successful real estate investment is created by becoming a master at working smarter not harder. Investors often see a deal and jump in feet first without comparing properties. Become a master by seeking quality investments over quantity.
Five Major Comps
Are you wondering what to compare when assessing a property? What do we mean by “comparing apples to apples”? Well, look no further! These are the five major comps that need to be evaluated prior to investing in a property.
1. Square Footage
Don’t stretch your square footage in hopes of increasing the property’s value. Take a good look at other properties on the market and compare the square footage to the asking price. Do the numbers add up?
2. Number of Beds and Baths
When comparing properties, it is extremely important to compare the number of beds and baths to that of other properties on the market. On average, people typically pay a little more for baths. Get your comparison ducks in a row before you get caught up in the buyer’s bubble.
Location, location, location! Make sure the property that you are considering is in a similar setting. Is your potential investment in a busy upcoming area, or a quiet house tucked away near a local park? Location can greatly affect the valuation of the property and impact your future cash flow.
Put yourself in the buyer’s shoes when evaluating parking allocations for a property. Does it have a garage? How many spaces are available? Is street parking the only option? Every property is unique, so be sure to go the extra mile before investing.
Not all communities are the same, nor should they be valued as such. A few things to consider when comparing communities are, the lot size, community amenities, bike paths, parks, and proximity to major roads. If your property doesn’t have the same amenities, it is vital that you continue researching similar properties in the area.
Watch our latest video to discover more about mastering the art of comping real estate properties.
Would you like more honest and fair help with your comps? Contact us today!