Looking at The Sales Comparison Approach (SCA)
The approach is used as the basis for comparative market analysis (C.M.A.), which is an analysis of the prices of recently sold properties that are similar and within the same geographic area. It’s important to note that the sales comparison approach is not an official appraisal, and if a property is unique, a formal appraisal might be needed. One of the best ways to determine multifamily and commercial investment real estate value is by doing a thorough analysis of the property’s physical and financial status. CAP rates are another good way to compare your sale price with others who have sold in your area.
To get sales comparison information you can do things like:
- Visit websites like apartments.com and craigslist.com to search for similar properties and units
- Get the comparison from your broker
- Get survey for rents from your property manager
- Access a local MLS listing
- Walk the property and visit apartments yourself physically
Make sure that you compile all that data to the spreadsheet and focus on rent per square foot mainly to compare your property to another.
A few great places to start your search is by looking at research from the major real estate brokerage companies in your area as well. A few of the national real estate brokerage firms that have great research reports are Marcus and Millichap and CBRE.
These companies produce research reports each quarter that you can get for free by registering on their websites. These research reports can tell you very valuable information such as; what properties have sold in your area, what they sold for, going CAP rates in your area, and comparable price per unit sales information. They can also tell you how your area compares to the rest of the US and their forecasts for how these numbers might change in the future.
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.