Doing a Comparable Sales Analysis for a Rental Investment

If you are considering making a rental investment, there are a number of things that you are going to need to evaluate properly. In order to determine if the property is a good investment, you might want to consider utilizing a comparable sales analysis. Here are the basics of the comparable sales analysis for rental investments.

Comparable Sales Analysis

A comparable sales analysis is a process in which you will be able to determine the fair market value of a piece of property. If you are getting ready to buy a rental property, this is going to tell you if the price for that rental property is high or low. This process involves comparing the property that you are looking at against properties that have sold recently. If you complete this process successfully, you will be able to know whether you are choosing a good investment or not.

Accessing the Information

In order to conduct a comparable sales analysis, you are going to need to access certain information. You are going to need to get your hands on information about properties that have sold recently and at what prices. You can access this information through public records in some cases. The only problem with this is that the public records are most likely going to be outdated. If you want more recent information, your best bet is to work with a real estate agent. Since you are considering purchasing a piece of property, you should most likely be working with a buyer's agent anyway. They will be able to pull up recent information about any sales in the area through their databases. They regularly conduct this type of analysis and they should be able to walk you through the entire process.

Comparable Sales

The real estate agent will start out by pulling information about recent sales in the area. They will need to find properties that were located close to the subject property and are similar properties. Ideally, these sales should have occurred within the last six months. You should strive to find somewhere between three and six properties to compare against your rental property.

Comparing Features

Once you have a few properties to compare against your property, you will need to look at the individual features of each property. Start out by comparing your subject property against one individual property. Look at each property and determine what features are unique to them. You will then add value for features that the subject property has that the comparable property does not. If the comparable property has a unique feature, you will subtract value from the subject property. Continue doing this with all of the properties.

Analysis

After you have looked at all of the different features and properties come you should be able to determine an approximate value for your subject property. If the value is less than what the property is selling for, you may have a bargain on your hands. If the value is more than what a rental property is selling for, the seller is asking too much.

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