How to Do Property Market Research – Property market research is everything when you’re considering investing your hard saved money in property. Whether you’re looking to buy a property for your own home or to invest in commercial real estate, there are certain things you must do to get started.
The property market is constantly shifting. If you’re thinking of buying a property, you should find out how the market stands at the moment. Below are some of the most important pointers on how to do effective property market research.
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Look at historical data first
Before you can understand where the market is going, it’s important to understand where it’s already been. Reviewing online real estate market performance reports from Zillow or the National Association of Realtors (NAR) make it easy to learn what’s been selling and for how much.
By using the internet to gather transparent data from multiple sources, you’ll filter out the built-in bias that some people within that market might have.
Resources rental property investors use to gain a broad perspective of the local real estate market include:
- Local newspapers
- Community websites
- Social media
- Investment clubs
- Online investment portals
Research neighborhood quality and amenities
County assessor websites and Street View by Google Maps are excellent tools to use to research and narrow down potential property purchases without ever leaving your office. If the house backs to a garbage dump or major highway you can simply delete the property from your list and move on to the next one.
Other neighborhood qualities and amenities that affect property value include closeness to public transportation, proximity to shopping and schools, and nearby recreational amenities like parks and beaches.
If you have your eye on a particular single-family home, you can also pop in the address into Roofstock’s Cloudhouse tool. You’ll get a comprehensive and fully customizable underwriting estimate, as well as a 1-5 star rating of the neighborhood powered by Roofstock’s proprietary Neighborhood Rating.
Select comparables for your real estate market analysis
Begin your initial real estate market analysis by selecting six comparable properties. Three should be homes in the neighborhood that have sold within the last few months; then choose three more homes that are currently on the market.
When selecting comparables for your subject property look for:
- Homes with the same number of bedrooms and bathrooms.
- Houses having square footage within 10% to 20% of your intended purchase.
- Property with a similar lot size and shape.
- Select houses with a similar original construction date, elevation (also known as architectural design), and number of floors or stories.
- Homes with similar features such as free standing garage, outdoor swimming pool or patio deck, and scenic views.
- Choose homes in the same neighborhood and preferably on the same block.
- Select properties that are in the same school zone (because a low-quality school can have a significant negative impact on value).
Fine-tune your market analysis with adjustments to your comparables
Every piece of real estate is unique, so the odds are that not every home on your list of comparables has the exact same features and amenities.
To make sure you’re comparing apples-to-apples, you’ll need to make adjustments to your comparables. An adjustment is something that adds or subtracts value from your subject property.
By using the spreadsheet format you’ll be able to see a pattern of how the specific features and amenities of each house affect the sales or listing price, and the price per square foot.
For example, because swimming pools and newer roofs can add value, the price per square foot may be higher. Homes with only 2 bedrooms will be worth less than 3 bedroom homes, and property with an old roof or outdated heating and cooling system will have less value than a house with recently updated equipment.
When you’re finished making adjustments to your comparables, recalculate the price per square foot. This will give you an accurate idea of the fair market value of your subject property.
Narrow down a region/neighborhood
Since real-estate is location-based, you must first settle on a region or a neighborhood you are interested in serving. If you are undecided, consider a few areas that you’d like to learn more about.
Identify the target market of your neighborhood. You can do so via secondary research, by finding the demographics of your intended neighborhood. There are several sources that fetch this data, including Neighborhood Scout, Census demographics data, for example for New York City and Movoto.
Aside from gleaning the target market, these tools gather other key info like crime, local schools and even real estate data.
Observe Your Desired Neighborhoods
Aside from looking at your direct competitors in the particular neighborhoods you set your sights on, you should also look into each neighborhood’s supply. This refers to the number of properties currently on offer in the neighborhoods.
Then, you’ll need to find how in-demand a particular neighborhood is. To find this, you’ll have to survey your target market, or even the broader market of consumers seeking to find a residence or space to move into.
If you survey your target market, you can get their opinions about moving into a neighborhood. The more responders who prefer a neighborhood, the more expensive its properties become. In short, demand dictates the competition of a region.
As part of your neighborhood observation, peruse several listings of the available properties, office space, apartments, or whichever real estate is most relevant to you. Pay attention to the prices in particular and compare them with your existing ones, or the ones you set out to charge.
This will give you a real-world view of pricing and pricing expectations of your target market.
Gauge how the neighborhood has been faring
After you examine the physical characteristics, you should get a deep read of how the neighborhood has been faring. This includes delving into the economics, construction and business performance of the region.
When developments are underway, they could impact a neighborhood’s properties. At times, they may incite new companies to arrive in the region. Some may impact the local economy positively, while others may worsen it.
An uptick in commercial real estate is usually a sign of a healthy local economy. This will stoke the interest of buyers and with more sales, the cost per property square foot will be on the rise.
Research the demographics of the neighborhood. This will allow you to be clued in to the target market as well as giving your buyers more insights. An elderly population, for example, is great to highlight to retirees and others within this age range.
But perhaps younger buyers are seeking a neighborhood with other young professionals.
Moreover, age and ethnicity are not enough to determine how a neighborhood will fare — and neither how your business will either. You’ll need to understand your target market at a deeper level.
That is where surveys rear their usefulness again. A survey with the right questions will give you all the answers you need to understand how to best appeal to your target market. It can also give you more insight as to the price and style of real estate your consumers are seeking.
Assess the Original Listing Price
Once you’ve done the property analysis, look online for the original listing, if possible. This will give you a good idea of the general condition of the home. Go through the photos and descriptions for any upgrades, remodels or potential issues. The builder or developer should also be listed so you can determine if it was custom built or cookie-cutter home.
Search Comps
The next step is to search for properties that are comparable to yours. Comparable properties should have the same number of bedrooms and bathrooms, within 300 square feet in size, located in the same neighborhood, similar lot size, age of home and features.
Identify Recently Sold Properties in the Area
By looking up sold listings online, you will be able to see exactly how much similar homes sold for in the area. Look at past listings within a radius of one to three miles from your property. Search for homes that were sold in the last three months, as this will give you the most accurate value as market trends fluctuate. Then, if necessary, expand your search to the last six months. Pick three to five comparable properties and add them to your list of comps.
Decide the Market Value
Based on all your research, you should have a price range for what your property is worth. Take into account everything you observed while walking through the home and how it will impact the value. Then, take the selling prices of the comparable homes on your list, divide that price by their square footage, and get the price per square foot for each home. Once you have calculated the average price per square foot of your comps, multiply that by the square footage of the home you are trying to sell or buy.
Conclusion
If you’re considering buying property or just want to get your finger on the pulse of the market, investing in some property research can be a great way to go about it. It will help give you an understanding of what areas are most sought after by home buyers and also give you an idea of how much prices are generally.