Property comps and CMA reports are standard terms in REI, but what are comps? Why are they important?
As a real estate investor, you know that you can’t possibly expect a profitable ROI without first getting a good deal on a property. But where do you begin to find such a property? And once you do find it, will you be able to predict if you’ll earn a profit?
The answer is in the brilliance of comparable sales analysis. Comparable sales are a critical part of assessing the current market value of a property and are essential to a successful investment.
What Are Property Comps?
For those of you who don’t know, “comps” is the industry-used term for comparable sales. To determine the value of an investment home, an appraiser or an agent will use data to compare all properties in the area that are listed for sale, have a pending sale, or have already sold.
This information is available for homes listed on the MLS, or Multiple Listing Service, and the objective is to compare properties that are similar in size, condition, and location to your own. By educating yourself on what’s been paid for similar homes in the area, you can determine how much someone might pay for your property. This is the best estimate of the Fair Market Value of your property.
Can I pull my own comps? Or do I need to hire a professional?
Those who don’t have experience pulling comps should proceed with caution. The results of pulling reports like these can depend solely on the user, and, depending on which properties are chosen for review, the results of the user may vary.
There is no official, standard way to pull comps, nor is there any set of rules to be followed. Not all comps may be pulled the same way, so it’s crucial to do your homework. Before you make any significant purchases or decisions, research the best way to pull property comps and always take your time when choosing between available properties.
When all else fails, ask for help! You need to ensure you are correctly pulling your report, so don’t be afraid to reach out. There’s plenty of real estate professionals and fellow investors who have experience pulling comps, and many organizations have made many helpful tips available online.
What’s the best way to pull comps for my investment property?
Real estate agents and certified appraisers have access to the MLS, and they use this as the primary source of comp information. Those who are not agents or appraisers might have a harder time accessing this data, but there are resources available for investors to get accurate comps, themselves.
Online technology is a beautiful thing, and it is what makes property comps more accessible for the rest of us. There are companies with websites or apps that allow users to search for real-time Comparable Market Analysis reports on all prospective properties. In seconds, these comp systems customize and calculate essential data, so users may weigh their financing options and preview their estimated ROI. No matter whether you decide to fix and flip, or fix and rent your property, you can preview your potential outcomes and make a well-informed decision.
Not just comps, there are tons of online resources for REI
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