Real estate comps are a great way of measuring how profitable a property could be. A good comps calculator can certainly elevate your game.
Investors and real estate professionals often use real estate comps to see if a neighborhood is worth investing in. The ability to thoughtfully evaluate and assess a neighborhood’s potential for profit can help increase your chances of real estate investing success.
Table of Contents
- What Is a Comps Calculator and Where Can You Find One?
- What Are Real Estate Comps?
- How to Find Real Estate Comps
As a real estate investor, you would want to use everything you can get your hands on to ensure your investment grows and succeeds. It includes using real estate comps and rental comps and the data they provide.
Unfortunately, a lot of investors do not pay close attention to comps. Little do they know that comps are very useful in determining how much you can earn from an investment. Don’t be like them and learn how to utilize comps so you can easily determine whether a particular property or market is right for you.
It will save you a lot of time–and money–in the long run. If you can figure out a way to evaluate a market using comps and a comps calculator, you can pretty much go about your business in a more efficient way.
In this article, we will go over the advantages of using comps and a comps calculator to grow your real estate investment and rental property business. Let’s start.
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What Is a Comps Calculator and Where Can You Find One?
Simply put, a comps calculator is a tool used by real estate investors and professionals to calculate one’s return on investment on a particular property. It uses data from other comparable properties, such as:
- Listing price
- Rental income
- Cap rate
- Cash on cash return
- Occupancy rate
A comps calculator takes into account these data when calculating your ROI and potential revenue on an investment property. It is especially useful if you’re planning to start a rental property business, as it can give you an overview of what a neighborhood has to offer.
Real Estate Investing in a Digital Age
Investing in real estate used to be so taxing and costly. Doing your real estate research and analysis the conventional way was very time-consuming, lasting from several weeks to a few months.
Nowadays, technology is making it a lot easier for people to get into. Real estate investing in a digital age is far more cost-effective and time-efficient compared to the past decades. Investors now enjoy access to a plethora of resources and tools online. They include essential real estate data and tools for investing.
And while there are plenty of options online for data and tools, where you source them also matters a lot. Real estate websites vary in terms of the quality they offer. For this reason, it’s also important to choose the right platform for your real estate investing needs.
Enter the real estate website Mashvisor.
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The Best Place to Find a Comps Calculator
Mashvisor is a real estate platform that was launched in 2014. The platform offers its users access to some of the best real estate investing tools as well as high-quality data. For nearly a decade, it’s been helping real estate investors like you acquire essential information to make educated investment decisions.
As a platform, Mashvisor offers you only the most up-to-date real estate market data gathered from reliable sources like Realtor.com, RedFin, the MLS, and Airbnb. It keeps its database regularly updated so you can come up with highly accurate and realistic ROI calculations and revenue projections.
Mashvisor’s investment property calculator taps into its database and uses actual real estate comps in a particular neighborhood to give you the best results when computing for profitability. Due to its quality data and massive database, investors demonstrate greater confidence in using the platform. It serves as a one-stop shop for their real estate investment needs.
The website boasts a high TrustPilot rating of 4.7 out of 5 stars at the time of writing. If you’re looking for a real estate app that offers the best data and comps calculator, look no further than Mashvisor.
Get access to Mashvisor’s comps calculator and other tools to get you on your way to a thriving real estate investing career. Get started on your 7-day free trial today.
What Are Real Estate Comps?
We’ve been going on and on about comps calculators, and maybe some of you don’t know what comps are. Let’s talk about comps for a bit.
Real estate comps (short for comparables) are properties in an area that share similar qualities and characteristics to the subject property.
For instance, if you’re in the market for a four-bedroom, three-bathroom rental property, you should check how other similar properties are performing as rentals in your neighborhood of choice. You can go about doing it the conventional way or the Mashvisor way. But either way, all you need to do is find comparable properties for your rental property analysis.
Generally, real estate comps are used to analyze a property’s fair market value, regardless of whether you’re buying or selling. Real estate agents and investors know how essential real estate comps are to find the right investment property.
As a seller, you get a better idea of how to set a reasonable asking price for your property. If you’re a buyer, you’re also getting a good idea of whether a particular property is worth investing in or not. If it is, knowing how much other similar properties sold in the past gives you negotiating power, so you can get the best deal for a potential investment property.
Rental comps are subcategories of real estate comps. They can be categorized into two: long term and short term rental comps.
Long term rental comps are used to determine how profitable a long term rental could be in a given rental market. Since long term rentals are the more popular options for investors, investors and landlords use them as their baseline for comparing rental properties in an area. They focus mostly on the amount of fixed income they can make monthly or annually.
On the other hand, short term rental comps are used by investors to evaluate if a vacation rental business will thrive in a particular neighborhood. While long term rentals are the more common investment properties, vacation rentals are also quite popular. Due to its growing popularity, more and more investors are looking to start vacation rental businesses.
Short term rental comps help investors decide if a vacation rental strategy is right for the market they’re in. The main challenge for them is using short term rental comps as they don’t come with fixed nightly rates or occupancy rates. It is because seasonality and tourism affect vacation rentals.
And even if you go on the MLS for short term rental comps, you will find that the data offered there is quite limited. Logically, even if you’re using the best comps calculator, without sufficient access to real estate comps, you won’t make any real progress.
What to Look for With Real Estate Comps
When looking for comps, you need to watch out for the following:
Make sure you have a specific location in mind. A neighborhood, a street, a village, or a specific address. While typing “real estate comps near me” on a search engine will get you results, being very specific with your search will generate more accurate results.
One of the things investors and real estate professionals look at when checking out real estate comps is the market value. It simply pertains to the price a property sold for in the past. With the property’s market value, you can take out your calculator to compute a property’s potential cap rate and cash on cash return. It will allow you to see if it’s worth investing in or not.
If you’re looking to start a rental property business, rental rate is a key metric for you and your calculator to watch out for. It will give you a good starting point when setting reasonable and competitive rates for the market you’re in.
When it comes to property size, you start looking for properties with the same physical characteristics as your subject property. Be on the lookout for properties with the same square footage in terms of floor and land area. Such things can impact your property’s potential income.
You should look for other property types that are like the one you’re interested in. For example, if your subject property is a single family home, look for other single family properties in the area. Search for those with nearly the same physical features as the subject.
Number of Bedrooms
When comparing properties, the number of bedrooms is one of the most important metrics investors and professionals use. Always consider comps with the same number of rooms as your subject property. A lot of comps calculators automatically take it into consideration.
Number of Bathrooms
Similar to the number of bedrooms, the number of bathrooms in a property is also an important metric to consider.
Accessibility to safe and secure parking is a main concern for homebuyers and tenants. Consider the type of parking provision of your subject property and see what type of parking other similar properties offer. Rental rates can be impacted by the type of parking on the property.
While similarities are mostly used to look for rental comps, you can also use your property’s unique features to your advantage. For instance, a similar property with the same number of bedrooms and bathrooms plus a two-car garage but lacks a pool like yours will impact your potential income.
Lastly, you need to keep an eye out for a property’s overall condition and how your subject property compares to them. The general condition of your property, especially the year it was built, will affect the purchase price and renovation costs. They will, in turn, impact your ROI and revenue. They are just little somethings to keep in mind before taking out the calculator.
How to Find Real Estate Comps
The right data and comps calculator should go hand in hand. Aside from using the best calculator, you also need to access a wide range of real estate comps for the most accurate investment property analysis.
Since real estate market data is important, where can you find plenty of real estate comp data?
While there are several good options available out there, Mashvisor is one of the best sources for real estate comps. As we already mentioned earlier, it provides a huge database that collects relevant and up-to-date information from trusted sources. What we failed to mention earlier is that its database covers nearly every real estate housing market in all 50 states.
In fact, if you use its Market Finder tool, you can easily compare multiple neighborhoods in any rental market of your choice. The overview gives you a better understanding of what each market has to offer you as a rental property investor.
Now, as you examine a market thoroughly, you can see how other similar properties are performing compared to your subject property. All you need to do is go to Mashvisor.com and enter an address or location of your choice using the Property Finder tool. From there, you can select which properties you want to look into.
As you select a property, the site will take you to a page that gives you the details and information you need, including comps and neighborhood data. You can do it for pretty much every property you click on.
Related: How to Find Affordable Investment Properties With Huge Potential
Wrapping It Up
To end, comps calculators are an important tool for real estate investors. It allows you to make fairly accurate computations using real estate comps in an area. However, where you source your real estate comps is equally important.
While there are lots of real estate comps sources available to you, not all of them offer the same quality data necessary to make realistic computations. Even if you use the best calculator in the world, without access to highly reliable real estate comps, you won’t make that much of a difference on your bottom line.
For this reason, we highly recommend using Mashvisor as your comps calculator and real estate data source, where you can access a wide database of real estate comps. Its tools make finding the right investment properties in the most profitable markets a lot easier and faster.
If you need help in analyzing the profitability of certain investment properties, schedule a demo with Mashvisor today to get access to the best real estate data and tools.