As you’ve launched your real estate investing business and started making money flipping houses, you’ve no doubt come across all kinds of information on the importance of market analysis. Good market analysis will show you how a market has moved over the past weeks, months, and years. It’ll let you see trends and patterns, and those will give you the ability to make accurate predictions about what the market will do in the coming weeks and months.

No market analysis is completely foolproof, as some events and market activity cannot be predicted. However, without market analysis, you’re basically shooting blind. With it, you can have a pretty good idea of what you’re getting into and how your properties are going to perform for you. So how can you analyze your local market to get more out of your real estate investments?

Restrict Your Market Sample

First, you need to find out what houses have been selling for in the area where you want to invest in the last three, six, twelve, and eighteen months. Be very specific in choosing your sample of comp properties. Don’t extend your search beyond a mile radius of your flip property, and only look at houses and properties that are comparable to yours. They should be close to the same age, home size, lot size, number of bedrooms, etc. If they’re too different, they won’t be good comparators.

Find out what comp houses in the area sold for at different times over the past few months, so you can map out those prices to start to see a pattern. If prices have been steadily descending over the last 18 months, you should probably look into buying your investment properties in another area that’s experiencing more growth. If rates are stable, you’ll have a good idea of where you stand, and if they’ve been increasing slowly, you should be in good shape.

Find Out What Comps Are Selling for Right Now

As an extension of this study, look at listings for comp properties in the same area that are for sale right now. Find at least three to get a good average market value, and don’t forget to pay attention to how long they’ve been on the market and whether or not they’re getting much attention from buyers.

As you look at list prices, remember that these are the prices that sellers are hoping they’ll get for their homes. A lot of people look at list prices for comp houses in their area and decide that they’re missing out if they don’t sell right now, only to find out that those list prices were too optimistic and their home isn’t worth as much as they’d hoped it would be.

Determine Your Property’s Value

It’s a good idea to take a drive around and look for houses that are under contract or have just sold. Find out how much they sold for, and you’ll have a better idea of the real market values in the area, rather than an estimate based on people’s asking prices.

As you take these prices into consideration, look at the market values of homes in the area over the past 18 months again. Based on this information, can you establish a pattern of how much those houses would likely be worth if they sold a month from now? Using this information, as well as specific information about different comps (age, size, whether or not they’re on a busy or loud street, etc.), you can come up with a much better price for your flip property that will help it sell quickly and get you a good profit margin, too.

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