The first thing people seem to want to know when looking at real estate is what a property is worth. One of the keys in figuring this out is figuring out the market that the property itself is located in. Obviously these are extremely important pieces of information to know, and there are many different methods to use to do it. Unfortunately, there is only one that really makes sense for an investor. Lets look at the various options, though:
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Ask A Realtor
This is typically what novice investors, as well as the realtors themselves will recommend. We have been taught that once you become a real estate agent, you suddenly know how to value properties. There is nothing further from the truth. Learning to evaluate property values is a skill that takes time and energy. You must hit the trenches to be able to do this, and that takes time. Seasoned agents are great resources, but real estate investors should not count on them to do their homework for them.
Remember that real estate agents make money when you buy or sell a property. They are salespeople. If you don’t buy something from them, they get no commission from you. It is in their interest for you to think that now is the time to buy, no matter how bad a market is. What I’m getting at is that you can never trust a salesman to give you the whole truth. While agents may know a market cold, are you going to trust someone who must convince you to buy now in order to make a living? For this reason above all others, it is imperative that you not rely on real estate agents to tell you what a market looks like.
Use The Internet
With the explosion of “property value websites” that use public records to give cool mapped out, graphical, representations of different marketplaces, the internet has changed the way people learn about real estate markets. These sites want their users to believe that they are providing an accurate picture of what a property is worth. They dazzle you with comparable properties that have sold, maps, charts and graphs, and more. Unfortunately, someone who does not understand how to truly evaluate a property themselves, will walk away thinking that they are getting a real value that means something.
This is untrue. While these sites are great tools for getting started, they should NEVER be used as a substitute for doing what it takes to understand a market, and thus, the value of a property in that market.
Get to Know the Market Yourself
There is no substitute for learning a market the old-fashoned way. As an investor, you need to see the neighborhood from the ground. You need to walk the streets, talk to the neighbors, and look at houses. Visit every property for sale in your market. Look at what they are selling for, their size, their ammenities, their flaws. If you get out there and see 50-100 properties that are for sale in an area, you’ll have a pretty good understanding about that market.
You won’t need a real estate agent, and you won’t need the internet. You will instantly develop an understanding of property and market values almost without knowing. If you do use a realtor, you’ll be able to know if they are correct in their analysis, but most importantly, when the time comes to look at a property that you’re interested in, you will know on the spot if it is fairly valued, overvalued, or if it is what we’re all in the game to find, a deal!