A real estate market study is a tool that helps us gather information to know, for example, if we should invest in a property, or determine the rental potential of a city or district. In fact, it would be crazy to buy a property without having information to support a purchase of this size.
Market research is the preliminary step that every investor must take before entering the market. The objective is to be sure that the project is viable and that it fits into the existing market.
Not all real estate investors have enough patience to carry out real estate market analysis competently. If you want your real estate business to stand out from the competition, you have to do your research.
Also read: 6 Thinks to understand before investing in real estate
Table of Contents
What is a real estate market study?
A real estate market study, also known as comparative market analysis, is an analysis of the current market values of properties, comparable to a property you are looking to buy or sell.
A real estate market study should always be done, whether buying or selling a property, as it will help to understand the current market, how much similar properties are worth, if it is an investment property, how much can be charged for rent, etc.
Real estate agents and brokers create reports to help sellers set listing prices for their homes and, less often, to help buyers make competitive offers.
The information gathered through a real estate market study helps the seller choose a listing price and helps buyers see if the asking price is too high, low, or reasonable.
Why do a real estate market study?
There are several reasons to do this type of study, the main one is to have information that allows you to invest and buy safely. Other reasons also include:
- Know if you should invest in one city instead of another.
- Identify what elements hinder investment in certain places
- Know demographic aspects to determine the evolution of the area where you want to invest.
- Have information about investment projects in certain areas and know if they will have a development in the future that will increase the value of properties.
- By knowing the housing market prices, you always have the opportunity to negotiate a lower price and avoid overpaying the market value of a property.
Tips for conducting a real estate market study effectively
Before starting to collect information, it is necessary to clearly define the market in which you are going to position yourself: type of products or services offered, type of market (individuals, companies, administrations, etc.), target geographic area, etc. A well-defined market is an essential starting point for conducting a relevant study.
- Property analysis: To carry out a real estate market study is to carry out an analysis of the property. The area and neighborhood, lot size, construction time, services and amenities, etc. must be evaluated.
- Original Price Assessment: Once you’ve done your property analysis, search online for the original listing, if possible. This will give you a good idea of the general condition of the house. Please review photos and descriptions for any upgrades, remodels, or potential issues.
- Verifying Property Value Estimates: Uses online resources to give you the estimated market value of the home. Since these are market value estimates, they may not be entirely accurate, especially if changes have been made to the home. But this will provide a good starting number to continue your study of the real estate market.
- Comparisons: Make a comparison of the property with others that are in the same area, aspects such as size, price and other elements will help you determine the value.
- Decide the market value: Based on all your research, you should have a price range for the value of your property. Take into account everything observed and analyzed and how it will affect the value.
Steps to carry out a real estate market study
It is necessary to adopt a structured and organized approach to real estate market research. To do this, you can segment your analysis around these four axes: market, demand, supply and environment, and then you have to ask the right questions.
The objective is clear: analyze the market potential and validate the commercial viability of your project.
Also read: Invest in Real Estate and Enjoy The Financial Freedom
Step 1: study the market and its evolution
As a first step, it is important to be informed about the market in a global way. The objective is to improve knowledge in this field: market volume, trends, and probable evolution.
Here is an example of a list of questions to ask when studying the market and its likely evolution:
- What is the market volume? In particular, in terms of turnover, customers, quantity sold…
- How is the market now?
- What are your prospects for the coming years? A market can be growing or stagnating.
- What are the current market trends?
- What products or services are available in the market?
- Who are your direct or indirect competitors? What do they propose? What are the common points and the differences between what the competition offers and your range of products/services?
- What are your terms and conditions of sale?
- Who are my potential suppliers and what conditions can they offer me?
These questions will allow you to develop your knowledge of the market situation and the actors involved.
Step 2: the study of the demand
Through the study of the demand, the objective is to know the clients of the market and evaluate if there is potential to be exploited. Here is an example of a list of questions to ask when considering demand in a real estate market study:
- How many customers are there in this market? How is this number changing (increasing, decreasing, stagnant)?
- Who exactly are these real estate clients? Where are they?
- What is the consumption rate of customers? How do they behave?
- What are the consumer’s choice criteria? What is your budget? What are the important points to activating a purchase?
Step 3: the study the offer
The analysis of the offer consists of studying in detail what your competitors already offer in the market. Here is an example of a list of questions to consider the offer:
- Who are the competitors in the market?
- Which companies have the largest market shares?
- What is the size of the main competitors? Where are they located and how do they choose their locations?
- How long have they been around and what is their financial health?
- What criteria do some competitors use to succeed better than others?
An in-depth study of the offer offered by the competition can help you identify opportunities to prepare your future offer and obtain competitive advantages.
Through a real estate market study you will have a better understanding of what works, the essential criteria for success, and also what has not worked.
Also read: How to Invest in Real Estate in Times of Crisis
Step 4: the study of the environment and legislation
The environmental study consists of analyzing the factors that may influence the market, such as the applicable regulations, technological developments or any other element that may influence it.
Here is an example of a list of questions to ask when studying the environment:
- What innovations are affecting the market?
- What is the regulatory framework that governs the market?
- Are there specific laws for this market?
- What are the trends in the evolution of legislation?
- Are there professional groups or other actors that act or influence the market?
Step 5: Data Collection Process
The data collection process is one of the most important to carry out a real estate market study since it allows you to collect information that helps you determine if the project is viable and your investment is safe.
Money Investors make it easy for you to conduct your field research to get the data you need. It doesn’t matter if you don’t have Internet access, our Offline App allows you to carry out surveys through mobile devices and download the information once you have a Wi-Fi connection.
Take real estate surveys and start getting the information you need to secure your investment in the real estate market.
Step 6: Presentation of the results report
Presenting a report with the information obtained will allow investors to carry out an analysis and determine which are the best strategies to secure the investment.
Our survey software allows you to visualize the data collected in real-time, which helps you to carry out a previous analysis of the information and prepare a report where you highlight what is relevant and the interested parties can visualize it and make better decisions. Start standing out in the real estate industry by making the right decisions with the help of data!